The Executive Compensation Controversy - Fondazione Rodolfo ...

THE EXECUTIVE COMPENSATION CONTROVERSY: 24 MAY 2010A TRANSATLANTIC ANALYSISTable 3.4Summary Statistics for 2008 CEO Total Compensation, by Company SizeTotal PayAverage Composition of Total PayGroupSampleFirmsAverage(€000s)Median(€000s)BaseSalaryAllBonusesOptionGrantStockPayOtherPayEUROPE 1,074 1,986 1,178 50% 20% 3% 16% 11%By Firm Sales (millions)Less than €350 289 889 677 56% 15% 3% 15% 11%€350 to €1,000 252 1,226 974 53% 21% 2% 15% 9%€1,000 to €4,000 275 2,007 1,387 48% 23% 3% 16% 11%Above €4,000 258 3,933 2,660 42% 22% 6% 19% 12%UNITED STATES)1,504 4,098 2,615 28% 20% 20% 27% 6%By Firm Sales (millionsLess than €350 245 1,448 1,010 40% 18% 17% 19% 6%€350 to €1,000 407 2,213 1,668 33% 18% 17% 26% 5%€1,000 to €4,000 476 4,020 3,106 25% 21% 21% 27% 5%Above €4,000 376 7,964 6,225 17% 21% 24% 32% 6%Note: European data from Boardex and US data from ExecuComp exclude firms with less than €100m in revenues.Total compensation defined as the sum of salaries, bonuses, benefits, and grant-date values for stock options,restricted stock, and performance shares. US dollar-denominated data are converted to Euros using the 2008 yearendexchange rate (€1 = $1.3919). The average (and median) results for all firms in Europe and in the USA arereported in Table 3.2.Table 3.4 provides summary statistics for the level and composition of fiscal 2008 CEOpay by company size and continent. As reported in the top panel, the average and medianlevels of total compensation increase monotonically with firm size: the median pay forcompanies with 2008 revenues in excess of €4 billion is €2.7 million, far larger than the€677,000 median pay for companies with revenues below €350 million. The bottom panelshows that American CEOs earn substantially more than their European counterparts, forevery size and industry group. The USA premium is especially pronounced for large firms(where the median US CEO earns 340% more). The right-hand portion of Table 3.4 describesthe average composition of CEO pay in the two continents. The divergence in equity-basedpay between European and USA pay practices is, again, especially pronounced forcompanies with revenues exceeding €4 billion. Within this group, salaries account for 42%of pay for European CEOs, but account for only one-sixth of pay for USA CEOs. Similarly,equity-based pay accounts for 56% of pay for CEOs in large US firms, but only account for25% of pay in the largest European firms.-67-