For the seventh year The Wall Street Journal has partnered with Hay Group, a global management consulting firm, on its annual survey of CEO Compensation.
This year's study includes the 300 largest public companies by revenue that filed their definitive proxy statements with the Securities and Exchange Commission between May 1, 2013, and April 30, 2014. For the first time this year, we include any companies incorporated or with their principal office location outside the U.S. Throughout this study, we refer to the most recent fiscal year reflected in the proxy filing as 2013 and the prior fiscal year as 2012.
As in previous reports, this study provides readers with a snapshot of total compensation as disclosed in each company's proxy statements. This includes each CEO's Total Direct Compensation (TDC), which consists of Salary, Bonus and/or Annual Incentives paid, and any Long-Term Incentive Awards (Long-Term Stock or Cash) granted. In addition, the study also provides information about each CEO's Change in Pension Value and Above Market Nonqualified Deferred Compensation Earnings.
A separate category, All Other Compensation, includes information on such items as perquisites, tax gross-ups, and company payments to a defined-contribution plan. Taken together, these elements provide a picture of each CEO's total pay for 2013.
Our approach to summarizing total compensation, and more specifically long-term incentive compensation, may differ from the approach taken in the Summary Compensation Table of the proxy itself. In most cases, this study focuses on the value of what was granted in 2013. However, if we identify clear disclosure that long-term incentive grants were made to reflect prior year performance, Hay Group will research the proxy to identify grants made to reflect the appropriate performance year and align all grants with the year for which they were earned.
Please note that this year's population of 300 companies is different than prior years’ populations. As a result, the summary statistics for 2012 will differ from what was reported previously. In addition, data prior to 2013 reflect compensation and performance figures as previously published and have not been updated for subsequent disclosures.
For companies that did not disclose the value of individual equity grants for either FY 2012 or 2013, and in cases of uncertainty where the disclosures were unclear, the equity values were determined by Hay Group.
All company performance data (Net Income, Total Return) is provided by S&P Capital IQ.
Company is the commonly used name for the company.
Executive is the CEO's name as listed in the company's proxy statement.
2013 Salary is the base pay earned in FY 2013, regardless of the form or timing of delivery.
2013 Annual Incentives is any payment of annual bonus or incentives earned in FY 2013, regardless of the form or timing of delivery. This number includes both payments classified as a bonus, which is typically considered discretionary, and those classified as annual performance-based incentive pay, which typically results from achievement of annual performance goals.
Stock Option Grants is the company-disclosed value of stock option and stock appreciation right (SAR) grants made during FY 2013. Any options that were repriced or granted as reload options are excluded entirely. Performance-contingent awards that have no upside or downside leverage, and that are not market-based awards, are treated with an additional 20% discount. Performance-contingent awards that are market-based are not treated with any additional discount.
Restricted Stock Grants is the value of time-vested restricted stock and/or restricted stock unit grants on the grant date made during FY 2013. Any grants where
the timing of vesting can be accelerated based on performance are included here. Any stock granted as a match or a premium on other compensation is also included here. This column does not include any restricted stock that is granted in lieu of salary or annual incentives/bonus; these values are included under the original form of compensation.
Performance Awards is the total value of cash- and stock-based long-term performance-based incentive compensation granted in FY 2013. Grants are valued based on their disclosed target value on the date of grant. Performance-contingent awards that have no upside or downside leverage, and that are not market-based awards, are treated with an additional 20% discount. Performance-contingent awards that are market-based are not treated with any additional discount.
Total Direct Compensation is the sum of Salary, Annual Incentives, Stock Option Grants, Restricted Stock Grants and Performance Awards.
Percent Change From 2012: TDC is the year-over-year change in Total Direct Compensation from FY 2012 to FY 2013. This information is calculated only for those CEOs for which there is valid data in both 2012 and 2013, and excludes new CEOs.
Change in Non-qualified Deferred Comp and Pension Value is the aggregate change in the present value of accumulated defined-benefit and actuarial pension plans plus the above-market or preferential earnings on compensation that is deferred on a basis that is not tax-qualified.
All Other Compensation is the value of other compensation for FY 2013 that was not reported in any of the other columns of the Summary Compensation Table. Compensation in this column could include the value of: perquisites and personal benefits; tax gross-ups; discount stock purchases; company contributions to a defined-contribution plan; or company payment of insurance premiums.
Total Compensation is the sum of Total Direct Compensation, Change in Nonqualified Deferred Compensation Earnings plus Change in Pension Value, and All Other Compensation.
Total Realized LTI is the sum of gains from Stock Option exercises, Restricted Stock value at vesting, and Long-Term Incentive cash payouts in FY 2013. This represents value realized from awards that have been granted over time.
Percent Change From 2012: Company Net Income is the year-over-year change in the company's net income from FY 2012 to FY 2013.
2013 Total Shareholder Return is a one-year total return for the company's stock during FY 2013, including stock-price appreciation plus reinvestment of any dividends declared in FY 2013.
2011-2013 Annual Total Shareholder Return is a three-year annualized return for the company's stock during FY 2011-2013, including stock-price appreciation plus reinvestment of any dividends declared from FY 2011 to FY 2013.
3-Year Realized Total Direct Compensation is the sum of Salary, Annual Incentives, gains from Stock Option exercises, Restricted Stock value at vesting, and Long-Term Incentive cash payouts over the course of FY 2011-2013. For Stock Options, Restricted Stock and Long-term Incentive cash, this represents the value realized from awards that have been granted over time.
Any compensation for CEOs with less than a full year of service is calculated based on the values disclosed. Signing, special-recognition and retention awards are included for each company that offered them. Percent changes of 1,000% or greater are not meaningful and are designated as N.M.
Percent changes for CEOs who are new in either FY 2012 or FY 2013, or data that is otherwise unavailable or incalculable, are designated by N.A. Industry medians exclude new CEOs for 2013.
Please direct any questions or comments about the survey methodology to Steve Sabow, Hay Group's director of executive compensation research, at 201-557-8409 or Steve.Sabow@haygroup.com .