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Making merry

It turns out that the good times are even better than we thought for CEOs in the US. A preliminary examination of executive pay in 2010, based on data available as of April 1, found that the paycheques for top executives in the US were growing again, after shrinking during 2008-09.

But that study, conducted for The New York Times by Equilar, an executive compensation data firm based in Redwood City, California, was just an early snapshot, and there are more riches to come. Some big companies had not yet disclosed their executive compensation.

So Equilar ran the numbers again and this time around brace yourself!

The final numbers show that the median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 per cent gain from 2009. The earlier study had put the median pay at a not-too-shabby $9.6 million, up 12 per cent.

Total CEO pay hasn’t quite returned to its heady, pre-recession levels but it certainly seems to be headed for the increase. Despite the soft economy, weak home prices and persistently high unemployment, some top executives are already making more than they were before the economy soured.

“Pay skyrocketed last year because many companies brought back cash bonuses,” says Aaron Boyd, head of research at Equilar. Cash bonuses, as opposed to those awarded in stock options, jumped by an astounding 38 per cent, the final numbers show.

Although many US corporations did well last year and profits were up substantially, many companies are sharing the wealth only with their executives. “We’re seeing a lot of that reflected in the pay,” Boyd says.

And at a time of so much tumult in the media business, it might be surprising that some executives in media and communications were among the most richly rewarded last year.

The preliminary and final studies put Philippe P. Dauman, chief executive of Viacom, at the top of the list. Dauman made $84.5 million last year, after signing a new long-term contract that included one-time stock awards.

Leslie Moonves of CBS Corporation got a 32 per cent raise and reaped $56.9 million. Michael White of DirecTV was paid $32.9 million, while Brian L. Roberts of Comcast Corporation and Robert A. Iger of Walt Disney Company, each received pay packages valued at $28 million.

“Media firms seemed to be paying a lot,” said Carol Bowie, head of compensation policy development at ISS Governance, which advises large investors on corporate governance issues like proxy votes. “Media companies in general tend to be high-payers, and they tend to feed off each other.”

Other big payers included oil and commodities companies like Exxon Mobil and a few technology giants like Oracle and IBM.

Most ordinary Americans aren’t getting raises anywhere close to those of these chief executives. Many aren’t getting raises at all or even their regular paycheques. Unemployment is still stuck at more than 9 per cent.

In some ways, CEOs seem to live in a world apart when it comes to pay. As long as shareholders think that the top brass is doing a good job, executives tend to be well paid whatever the state of the broader economy. And some corporate boards were probably particularly generous in 2010 after a few relatively lean years for their top executives. In other words, some of this was makeup pay.

“What is of more concern to shareholders is that it looks like CEO pay is recovering faster than company fortunes,” says Paul Hodgson, chief communications officer for GovernanceMetrics International, a ratings and research firm.

According to a report released by GovernanceMetrics in June, the good times for chief executives just keep getting better. Many executives received stock options that were granted in 2008 and 2009, when the stock market was sinking.

Now that the market has recovered from its lows of the financial crisis, many executives are sitting on windfall profits, at least on paper. In addition, cash bonuses for the highest-paid CEOs are three times pre-recession levels, the report said.

Meanwhile, millions are out of work or trying to hold on to their homes or both. And it’s not as if most workers are getting fat raises. The average US worker was taking home $752 a week in late 2010, up a mere 0.5 per cent from a year earlier. After inflation, workers were actually making less.

On the flip side, some CEOs have consistently taken token salaries sometimes, $1 choosing instead to rely on their ownership stakes for wealth. These stock riches don’t show up on the current pay lists, but they can be huge.

Warren E. Buffett, for instance, saw his stock holdings rise last year by 16 per cent, to $46 billion. Other long-time chief executives or founders who are sitting on billions of paper profits include Jeffrey P. Bezos of Amazon.com and Michael S. Dell, the founder of Dell.

Resurgent executive pay has some corporate watchdogs worried that companies have already forgotten the lessons of the bust. Boards have promised to tie executive pay to company success, but by some measures pay is rising faster than performance. For the moment, shareholders aren’t storming executive suites. And the perks for CEOs are gradually being cut down.

The so-called tax gross-ups, in which companies cover executives’ tax bills on perks like corporate jets are becoming rarer. Disney for instance, eliminated tax gross-ups this year in the face of shareholder ire. Company directors have the power to rein in runaway executive pay, but it is unclear whether either they or shareholders will do so in 2012. “It can be done if there is the will,” Bowie says. But whether that will happen soon, remains to be seen.

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