CEO pay lucrative in Carolinas

CHARLOTTE -- Last year was lucrative for CEOs of the largest Carolinas companies.

Nearly 20 percent of the leaders at the Carolinas 50, some of the states' biggest public companies, received more than $10 million in total compensation, the highest rate since the Charlotte Observer began its annual compensation review. The total increased by 30 percent between 2005 and last year, when it stood at $276 million.

But experts say those paydays could plunge amid a faltering economy and increasing scrutiny of executive pay.

"I think pressure on boards will be intense this year," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "The issue has finally hit the wall, given performance and public outrage."

Several factors continue to put the squeeze on CEO compensation.

Scrutiny from politicians and the public alike remains high following repeated rounds of federal bailouts. Just last week, New York-based insurer AIG, which has received about $150 billion in government assistance, said its top executives would receive no bonuses for 2008 and have their salaries frozen - and that it would cut its CEO's pay to $1 a year.

And this month, as the chiefs of the big three U.S. automakers made their case for a bailout on Capitol Hill, lawmakers pressed them to slash their salaries. (The heads of Ford and GM deflected the questions, and the CEO of Chrysler said he'd work for $1 a year in salary, though he's believed to have other incentives.)

But even companies not receiving government cash are feeling heat to cut back executive pay amid a major economic downturn.

For many companies, like many consumers, this continues to be a rough year.

The Standard and Poor's index, which benchmarks stock for 500 of the nation's biggest companies, was up 3.5 percent for the year in 2007. This year through Friday, the index is down 38 percent.

In a new survey by Pearl Meyer & Partners, a compensation consulting firm, one in five board members, executives and human resource professionals said market turmoil will have a significant impact on executive compensation decisions during the next half year. And half of the 410 people responding to the survey expect salary growth to be lower next year.

Mark Rosen, managing director in Charlotte for Pearl Meyer, said he did not expect to see a lot of options being exercised for some time because the stock market has been so erratic, which could lead to a drop in overall compensation for some.

"If you ask me where executives are feeling the pain it's with equity stock or options they didn't sell in the past. I know it's worth a lot less today," said compensation expert Tom Kelly, with Watson Wyatt in Charlotte.

One client held equity awards that were worth $3 million to $10 million last year and are worth $1.5 million or much less this year.

Initial findings from Watson Wyatt's 2008 executive pay research report show a growing number of companies are making executive pay programs more shareholder friendly.

Watson Wyatt surveyed 75 large, publicly traded companies. It found that 38 percent of them have "claw-back policies" to recoup incentives if the financial measures underlying the incentive plan need to be restated. In its report last year, 23 percent of companies had such policies.

Bonuses are also in the cross hairs. They likely will be on the decline, since they typically are tied to performance, said Alexander Cwirko-Godycki, research manager for Equilar, an executive compensation research firm in California. In November, Goldman Sachs' CEO and several other top executives said they will give up cash bonuses, stocks and options for this year.