C-Suite Pay on the Decline
July 27 2009 by Fayazuddin A. Shirazi
The impact of the financial meltdown has apparently taken a toll on C-level executive salaries with many of the C-Suite executives experiencing a considerable decline in their pay checks. The executives in question are from the insurance industry which has recorded an overall slump of 11 percent in executive salaries, with other sectors with in the industry recording higher levels of C-level pay reductions.
A survey by Charlottesville, VA based SNL Financial, a resource on financial information to business sectors, said the total compensation was down by 11 percent across all lines of insurance business. “Not surprisingly, the most auspicious drop came for executives in the mortgage and financial guarantee sector, where CEOs saw their year-over-year compensation fall by an average of 73 percentÂ and CFOs saw a 46 percent reduction,” a news report published in Insurance Networking News said quoting the SNL survey.
According to the “Executive Compensation Review for Insurance companies” even CEOs at multi-line and managed care carriers took a major impact recording average reductions of 27 percent and 24 percent, respectively. However, the sole line of business which weathered this downturn was life and health insurers, where CEOs recorded a marginal increase of 3 percent in their pay checks.
A cursory research and analysis by CE Online also depicted a similar trend with majority of the insurance companies reporting a reduced CEO pay. Out of the 27 insurance companies from the S&P 500, CE Online analysis demonstrated that 17 companies have seen a decline in C-level compensation packages, while nine companies have reported an increasing trend.
Some of the prominent companies where CEOs have taken considerable pay hits include those from the Health & Disability sectors, with CIGNA CEO Edward Hanway and Humana CEO Michael McCallister both recording a 50 percent decline in their pay packages.Â Closely followed are WellPoint CEO Angela Braly and Principal Financial Group CEO Larry Zimpleman with 42 percent and 41 percent declines in their respective pay figures.
|CEOs Compensation Insight (2007-2008)|
2008 ($ Mil)
2007 ($ Mil)
H. Edward Hanway
Michael B. McCallister
Angela F. Braly
Principal Financial Group
Larry D. Zimpleman
Stephen J. Hemsley
Daniel P. Amos
Mark S. McAndrew
Thomas R. Watjen
Ronald A. Williams
Coventry Health Care
Dale B. Wolf
Source: SEC Filings
* The Table depicts S&P 500 insurance companies (Health & Disability) only.
* Rankings in the above table are based on the percentage variance in CEO compensation figures.
Of those who braved the down trend and recorded a hike in their pay packages include CEOs such as Robert Henrikson, Metlife and John Strangfeld, Prudential Financials both of whom registered a pay hike of 5 percent and 14 percent respectively.
Will Retzer, a lead analyst at SNL, believes CEO pay is linked to the company performance. Â He says, while bases salaries of CEOs have increased in most cases, their total compensation of has declined, reflecting a decline in the value of stock options they hold.
According to him these (read survey) numbers do not come as a surprise.Â “If you look at the complete picture, compensation is really well linked to performance,” Retzer told Insurance Networking News. Â “Base salary rose across the board for all insurance companies, but total compensation fell,” he said.
Retzer notes that at a large insurer, base salary can make up as little as 10 percent of executive pay, with a similar, shrinking percentage coming in the form of a cash bonus, while more than half comes from equity awards. Indeed, the average percentage derived from equity awards rose to 56 percent for CEOs in 2008, up from 49 percent in 2007.
Despite the largely negative tenor of the numbers, Retzer says things could be worse, especially when held up against other sectors. “When I look at insurance, it’s not as affected as much as the rest of the financial services industries.”