News - For Immediate Release

The first 2010 SEC reports with executive compensation are starting to come in and show declines in year-over-year comparisons, but the rate of decline appears to have slowed. ERI tracks executive compensation for 45 publicly-traded companies to identify current trends. Highlights from the analyses include:

• August 2010 Total Overall Compensation for the highest paid executive was down 7% from August 2009; this compares to a May 2009 to May 2010 decline of 10%.
• Base Salary dropped over 4% from May 2009 and is at levels last seen in 2002.
• Company Revenues have now decreased for the second consecutive quarter.

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.

Table 1 demonstrates how companies have been addressing the need to continue to pay top executives at a high level, but also address economic changes. In 2009, the total of Stock Awards and Stock Options was at its lowest point since 2006. While compensation components of Base Salary and Bonus/Non-Equity Incentives have continued to drop in 2010, stock-related compensation has made a slight recovery (though still similar to levels seen in 2006). Company revenues continue to drop: the May 2010 report found company revenues down 9.9% from the prior year, and this August 2010 report shows a decline of 10.6% from August 2009. This increased rate of declining revenues appears to have led to lower Bonus/Non-Equity and Base Salary figures, but has had less of an impact on equity-based compensation.

The component with the largest decrease (a drop of 37% in discretionary "All Other Compensation", its lowest level since 2003) makes up a relatively small proportion of total compensation. Much more influential is the 21% drop in Bonus and Non-Equity Compensation – this makes up such a large proportion of Total Compensation of the highest-paid executive that it is the driving factor behind the overall drop of 7% in Total Compensation (Figure 2).

Table 1 also reports the previous year in which the current levels of compensation were last seen. In the case of Base Compensation, this is eight years ago (2002), with Total Compensation at a level last seen in 2006.

Dr. Chris Chasteen, ERI Research Director, noted, "Executive compensation in volatile economic times is challenging – salaries and their components need to be responsive to company revenue and stock price levels, yet still provide incentives to top management – and the trigger points for payments and awards need to be determined in advance. So what looks reasonable now may not look so reasonable to stockholders or to the executive a year in the future when the actual payments are made. ERI will continue to monitor the company performance and compensation reports to see whether the small rebound in stock-based compensation is just a quarterly up-tick or evidence of a broader change."

	August 2009	August 2010	Percent Change	Last Year at Current Level
Salary	$1,226,974	$1,173,708	-4.3%	2002
Bonus and Non-equity Incentives	$3,848,968	$3,055,875	-20.6%	2006
Restricted Stock	$4,684,349	$4,699,897	0.3%	2009
Stock Options	$3,968,588	$4,018,262	1.3%	2009
Total RSA/Options	$8,652,937	$8,718,159	0.8%	2009
Pension	$1,595,208	$1,543,604	-3.2%	2006
All Other Compensation	$767,844	$482,851	-37.1%	2003
Total Overall Compensation	$16,091,931	$14,974,197	-6.9%	2005
Company Revenues (Millions)	$63,836	$57,056	-10.6%	2006

Table 1: Highest Paid Executive Compensation by Compensation Type

Figure 1. Key Compensation Components and Company Revenue over Time

Figure 2. Trends of the Compensation Components, 2007 - 2010

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 American Red Cross, Alaska Airlines, Monster Worldwide, Aon Consulting, Honda, Amtrak, Adidas America, Inc., the IRS, the CIA, and the United Nations. 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.

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