Given the dollar value and the relative piece of total direct compensation we are seeing, it is critical that compensation committees align bonus payouts with performance measures that drive short-term shareholder value and support the company's long-term strategy
San Francisco, CA (PRWEB) September 17, 2007
Chief Executive Officer's cash bonuses surged 39% from last year according to the 2007 Semiconductor Industry Executive Compensation Survey, conducted by Presidion Pay Advisors, a San Francisco compensation consulting firm. This is partially fueled by an average year-over-year revenue growth of 45%, and a near tripling of net income at semiconductor companies.
The CEO's increase in annual incentive cash compensation, however, was offset by a 11% drop in annual stock-based compensation grants -- netting a modest 6% increase in CEO total direct compensation from the prior year.
"Given the dollar value and the relative piece of total direct compensation we are seeing, it is critical that compensation committees align bonus payouts with performance measures that drive short-term shareholder value and support the company's long-term strategy," said Brandon Cherry, a Principal at Presidio Pay Advisors. "Where there is a disconnect between company performance and executive pay, shareholders' return on investment in their executive management team should be reviewed," Cherry concludes.
The leveling of CEO total compensation happens as cash compensation for other executive positions increase. Total cash compensation for Chief Financial Officers was up 22% - creating "pay compression" across the top executives. Historically, CEO pay is 80% to 85% higher than the next highest paid executive. This margin narrowed to under 50% in this year's survey.
"Companies are no longer solely concerned with the competitive external market when determining executive compensation packages. There is a renewed focus on internal pay equity across the senior management team to ensure appropriate distribution of pay and recognition that the entire senior management team should be held accountable for delivering shareholder value," Cherry notes.
Presidio Pay Advisors 2007 Semiconductor Industry Executive Compensation Survey presents findings on executive pay and ownership levels in 112 semiconductor and semiconductor equipment companies. The survey also found that:
- Median ownership for all survey CEOs was 1.8% of total common shares whereas in companies with less than $125 million in revenue, CEOs held a median of 3.0%. This is a clear indication of the prevalence of higher levels of ownership in smaller companies where ownership has not yet been diluted.
- Compensation Committees approved long-term incentives equaling approximately 2.3% of average net income, or approximately $3.4 million to Chief Executive Officers for every 1% appreciation in historical three-year company stock price.
- In departure from the previous year, companies with higher revenues used more equity-based incentives as a percentage of total compensation. Typically, larger companies pay a larger percent of their total direct compensation in the form of base salary. This move could signal a sharper focus on pay-for-performance.
Presidio Pay Advisors is a San Francisco-based compensation consulting firm that provides companies with independent, strategic advice and support on a wide range of compensation issues. The firm's collective expertise encompasses a diverse array of human resources, finance, accounting, regulatory, and shareholder perspectives. You can find the Semiconductor survey and other industry compensation surveys on their website at http://www.presidiopay.com.
A complimentary synopsis of the Presidio Pay Advisors 2007 Semiconductor Industry Executive Compensation Survey is available to the media to download, or by contacting Brandon Cherry at 415-438-3402. The survey is available to the public to purchase for $850 on Presidio Pay's website.