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NINETY EIGHT REGENCY

Market gains set up CEO pay bonanza

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Market gains set up CEO pay bonanza

Stock options worth little in the downturn surged as economy rebounded

Rachel Beck / Associated Press

New York -- America's top CEOs are set for a once-in-a-lifetime pay bonanza.

Most of them got their annual stock compensation early last year when the stock market was at a 12-year low. And companies doled out more stock and options than usual because grants from the previous year had fallen so much in value that many people thought they'd never be worth anything.

But stock prices have generally surged ever since. Even with last week's sharp declines, CEOs still have enormous gains on paper.

"The dirty secret of 2009 is that CEOs were sitting on more wealth by the end of the year than they had accumulated in a long time," says David Wise, who advises boards on executive compensation for the Hay Group, a management consulting firm.

An Associated Press analysis of companies in the Standard & Poor's 500 index shows that 85 percent of the stock options given to CEOs last year are now worth more than they were on the day they were granted. For some the value jumped by a factor of 10 or more.

Ford Motor Co. CEO Alan Mulally's pay package illustrates this point. In March 2009, Ford granted 5 million stock options to Mulally. Using a complex formula, Ford assigned the options an estimated value of $5 million. At the time, Ford's shares were trading at $1.96. Since then, the stock has jumped nearly sixfold, and Mulally's options have a value on paper of about $48 million.

Mulally is also ahead on his 2008 options, which were valued at $9 million when they were granted two years ago. Now, they're worth close to $21 million.

Other findings in the AP analysis:

• The top-paid CEO in 2009 was Yahoo Inc.'s Carol Bartz, who got a $47.2 million compensation package in her first year on the job. Ninety percent came from stock awards and options.

• No financial companies were in the AP's top 10. Three were on the 2008 list. Citigroup Inc.'s Vikram Pandit went from No. 10 in 2008 to the third-lowest paid CEO in the AP analysis in 2009.

• The median value of performance-based cash bonuses rose 19 percent, making it the fastest-growing component of executive pay in the AP sample. CEOs generally had to meet goals for profits and stock returns in 2009 to receive the bonuses.

From The Detroit News: http://detnews.com/article/20100510/BIZ/5100326/1148/auto01/Market-gains-set-up-CEO-pay-bonanza#ixzz0nZb187VU

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