CEO and Executive Compensation Practices in the Russell 3000 and S&P 500
While boards need to prepare for increases in total executive compensation to ensure their companies remain competitive in the market for top leadership talent, they should also be mindful of stakeholder perception and their companies’ own long-term goals when designing compensation packages. This report documents trends and developments in senior management compensation at companies in […]
Posted by Dana Etra (FW Cook), Paul Hodgson (ESGAUGE), and Matteo Tonello (The Conference Board, Inc.), on Wednesday, October 30, 2024
Editor's Note:
Dana Etra is Managing Director and Head of the Boston office at FW Cook, Paul Hodgson is Senior Advisor at ESGAUGE, and Matteo Tonello is Head of Benchmarking and Analytics at The Conference Board, Inc. This post is based on their FW Cook, ESGAUGE, and The Conference Board memorandum.
While boards need to prepare for increases in total executive compensation to ensure their companies remain competitive in the market for top leadership talent, they should also be mindful of stakeholder perception and their companies’ own long-term goals when designing compensation packages. This report documents trends and developments in senior management compensation at companies in the Russell 3000 and S&P 500 indexes.
Key Insights
- Despite significant market volatility, 2023 and early 2024 saw positive shareholder returns, reflecting a resilience that is likely to extend into 2025 and may lead to further increases in total executive compensation.
- Increases in stock awards significantly outpace those of non-equity incentive plans, potentially overemphasizing long-term equity growth at the expense of short-term corporate goals.
- Although stock options now only represent on average 10% of total CEO compensation, compensation committees need to be vigilant that awards do not lead to excessive risktaking or other opportunistic behaviors meant to temporarily boost their value at the time of vesting.
- Developing a more structured and transparent approach to allocating CEO perquisites can help mitigate potential reputational risks and align executive compensation with long-term shareholder value.
