The Median Increase in CEO Pay Was Over 30 Percent Between Fiscal 2003 and Fiscal 2004 According to a New Survey By The Corporate Library of Recent Proxy Filings

PORTLAND, Maine--(BUSINESS WIRE)--Oct. 27, 2005--The Corporate Library:

The Corporate Library's new survey on CEO compensation finds the median year-on-year increase in CEO compensation doubled from 15.04 percent in last year's survey of proxy filings to over 30 percent in this year's survey. The average increase in this year's survey was 91 percent, driven by 27 CEOs receiving compensation over 1,000 percent greater than their previous year's pay.

“The year may change but our analysis of compensation practices shows that runaway CEO compensation is as unstoppable as ever”

A newly released survey of CEO compensation practices based on data from Board Analyst, a division of The Corporate Library, finds that the percentage increase in CEO pay doubled in 2004. The survey of CEO compensation covers 2,000 of the largest US corporations and is based on the latest available data from proxies filed through June 2005. The survey shows a median increase in Total Compensation of 30.15 percent between fiscal 2003 and fiscal 2004, compared to an increase of 15.04 percent in last year's survey, and a rise of 9.49 percent in 2002. The average increase in Total Compensation was 91.21 percent, driven by 27 CEOs who received increases that were over 1,000 percent.

The survey further found that Total Annual Compensation increased by a median of 11.77 percent between fiscal 2003 and fiscal 2004. This smaller increase is evidence that long-term incentives such as restricted stock and profits from stock options are fueling the large increases in Total Compensation. For example, Total Compensation for James Bagley, CEO of Lam Research Corporation, increased by 7,440 percent, triggered by over $31 million in stock option profits. Similarly, Total Compensation for Michael Coppola, CEO of Advance Auto Parts, increased by over 4,100 percent, driven by $42 million in stock option profits.

A special study to test whether the highest compensation increases in the S&P 500 were tied to company performance showed that the largest percentage increases in Total Compensation had very little connection to long-term value creation whereas the more moderate percentage increases in Total Annual Compensation generally reflected positive changes in year-on-year company performance. According to the survey, six of the ten companies whose CEOs received the highest increases in Total Compensation underperformed their peers in stock price appreciation over the previous five years. In contrast, the ten highest Total Annual Compensation increases appeared justified by short-term achievements.

"The year may change but our analysis of compensation practices shows that runaway CEO compensation is as unstoppable as ever," said Paul Hodgson, Senior Research Associate with Board Analyst. "CEO compensation is one of the most visible and telling indicators of the effectiveness of corporate governance but our findings have yet to show an overall improvement in pay practices despite the continued high level of public attention, calls for restraint, new exchange listing rules, new director independence requirements and new best practice statements."

Survey Details

The full survey, available from www.boardanalyst.com for $250, is based on a sample of the top 2,042 US companies as measured by market capitalization. All compensation analysis is based on full-year figures taken from the latest available proxy statements through June 2005. Proxy filing dates ranged from July 1, 2004 through to June 28, 2005. Over three-quarters of proxies were filed in 2005.

About Board Analyst

Board Analyst is the leading source for independent and objective corporate governance, compensation and performance information. A division of The Corporate Library, the leading independent research firm in this field, Board Analyst offers comprehensive company research and powerful analytic tools and supports the decision-making of leading companies across a diverse range of industries. For additional information please visit www.boardanalyst.com.

About The Corporate Library, LLC

The Corporate Library, headquartered in Portland, ME, is the leading independent corporate governance and executive compensation research firm, and is the parent company of Board Analyst. Founded in 1999 as the authority on corporate governance matters, key media, business and government leaders seek its unique insight and objective perspectives in this domain.