News - For Immediate Release
 
Contact: Linda Lampkin
PH 877.799.3428
FX
Linda.Lampkin@erieri.com
Executive Compensation and Company Revenue Growth Not As Strong
REDMOND, WA - January 10, 2012 - Total compensation for the highest paid executives was up the last quarter of 2011 nearly 16% over this time last year (Table 1). While this number represents a significant increase over the last year, it should not be taken out of context. The rate of growth, while strong compared to the increases of the average American worker, has been weakening since the beginning of 2011. ERI tracks executive compensation in a specifically selected sample of publicly-traded companies to identify current trends. Highlights from the analyses include the following:
  • From November 2010 to November 2011, Total Overall Compensation for the highest paid executive increased 15.5% to $17.9 million per year
  • Restricted Stock Awards increased 16.7%
  • Bonuses and Non-Equity Incentives increased 32% for the year
  • Company Revenues were up 9.7%

Executive compensation typically consists of several components - a fixed base salary, a variable bonus in cash and/or non-equity incentives based on meeting performance goals, and a variable equity payment in stock (either restricted stock awards or stock options) based on stock prices. Pension and other compensation components are added to the compensation package for these top executives.

Figure 1 shows that executive compensation only returned to positive territory in late 2010. As company revenues rebounded from losses in early 2011, executive compensation spiked to up 25% year over year (led by a nearly 40% increase in bonuses and non-equity incentives). As we progressed through 2011, company revenues continued to increase, but the rate of increase lost its momentum Over the same period, increases in compensation reversed course, but still remain positive.

Comparing two key indices over the past three years, we see some interesting trends (Figure 2). Previously, a drop in the Total Compensation Index (TCI) anticipated a drop in the Company Revenue Index (CRI). Both indices then returned to positive growth as the economy itself showed some signs of recovery. It appears that the TCI has reversed course over the past two quarters, and it remains to be seen if a decrease in the CRI will follow.

Table 1. Compensation Components Year-Over-Year

November 2010November 2011Percent Change
Base Salary$1,150,780$1,269,03510.3%
Bonus & Non-equity Incentives$3,383,182$3,949,33816.7%
Restricted Stock$4,822,070$6,149,81727.5%
Stock Options$4,127,431$4,211,8292.0%
Pension$1,609,983$1,684,3224.6%
All Other Compensation$421,056$654,94355.5%
Total Overall Compensation$15,514,502$17,919,28415.5%
Company Revenues (Millions)$57,226$62,7649.7%

Figure 1. Percent change over the past five years

Figure 2. Key indices over the past five years

About ERI Economic Research Institute:

ERI Economic Research Institute, Inc., is a leader in compensation and job content information. With data gathered from online surveys and an extensive survey library, ERI's staff of researchers provides subscribers with assessments of salaries, relocation costs, cost-of-living comparisons, and executive compensation. ERI's compensation databases contain over 20 years of collected data, covering the United States, Canada, the United Kingdom, and other countries throughout Europe. ERI subscribers include the majority of the Fortune 500 and thousands of other small and medium sized companies. ERI's products include the Salary Assessor®, Geographic Assessor®, Relocation Assessor®, Executive Compensation Assessor®, and Nonprofit Comparables Assessor® software and Occupational Assessor®, eDOT®. For more information about ERI and its products, visit www.erieri.com.