Room at the Top: As Pay Declines, CEOs Start to Bail

Chief executives made less money for the second straight year in a row in 2009. Now there are signs CEOs are starting to jump ship.
Chief executives made less money for the second straight year in a row in 2009. Now there are signs CEOs are starting to jump ship.

Being a chief executive isn't what it used to be. CEOs at major U.S. corporations are getting paid less, according to a Corporate Library survey released Tuesday, which found that median total annual compensation for North American CEOs declined for the second straight year in a row.

The survey analyzed compensation data from 823 proxy statements for the 2009 fiscal year, issued between July 1, 2009 and March 25, 2010. On average, CEOs for companies on the Standard & Poor's 500 index received $9.25 million in total compensation that year, according to the Executive PayWatch website.

CEOs Stayed Put in 2009

But with job openings hard to come by, the lower compensation didn't lead to mass departures last year. Aside from some high-profile departures, such as Rick Wagoner from General Motors and Kenneth Lewis from Bank of America (BAC), most corporate titans stayed put. Only 1,227 chief executives vacated their posts during 2009, the lowest level in five years, according to a survey from outplacment firm Challenger, Gray & Christmas. (Of course, Wagoner and Lewis hardly left empty-handed: Wagoner scored a $20 million retirement package and Lewis' payout totaled an eye-popping $125 million.)

And exceptions to the declining-compensation trend certainly exist as well. Warren Buffett, for example, actually got a raise last year. But he's only collected a $100,000 salary for running his Berkshire Hathaway (BRK.A) conglomerate for more than 25 years. Last year, his total compensation rose 6 percent to $519,490, mainly reflecting higher security costs for history's greatest investor.

As the economy improves, however, more CEOs are choosing not to stick around. CEO departures hit a 17-month high in February, with CEO turnover rising 10% to 340 announced departures in the first quarter, compared to 309 exits in the same period last year, according to Challenger, Gray & Christmas. So far this year, 95 additional CEOs have announced plans to retire, more than double the 46 retirement announcements in the first quarter of 2009, the company says.

U.S. CEOs Not Starving

If the departures are related to pay, it might help that many CEOs will also profit from stock options that were issued at the bottom of the market last year.

But investors such as Albert Meyer, a Plano, Texas-based portfolio manager at the Mirzam Capital Appreciation Fund, is skeptical that CEOs are leaving because of their pay. After all, U.S. CEOs are still paid so much better than their counterparts in other countries, Meyers, who considers executive pay practices when picking stocks, points out.

"No American CEO is going to starve," he says. "I would like to speak to CEOs who are leaving because they are not getting paid enough."

So would many people.