The consolation for CEOs was the dramatic increase in the value of their unexercised stock options from previous grants. They were up 79 percent, from a median of $6.7 million in 2001 to $12 million last year, thanks to the stock market rebound. Nevertheless, the average total value of the CEOs’ pay elements declined by about $5 million over the two-year period.
Ira Kay, national director of compensation at Watson Wyatt, said that the shift in stock-option value shows that companies are taking executive compensation seriously. “However, many CEOs have yet to feel the full impact of this swing, because the value of their unexercised stock options from earlier grants has skyrocketed,” Kay says.
Nevertheless, the “golden age” of stock options may be over, he says. Companies will need to find a new mix of incentives and rewards that will replace stock options as a way of keeping key executives motivated, Kay says.