The 1993 Soft-Letter executive compensation survey.Executive paychecks have always been a fascinating, emotionally charged subject. Depending on your point of view, megabuck meg·a·buck
1. One million dollars.
2. megabucks A large but unspecified amount of money. corporate salaries are either an appropriate reward for entrepreneurship en·tre·pre·neur
A person who organizes, operates, and assumes the risk for a business venture.
[French, from Old French, from entreprendre, to undertake; see enterprise. and risk-taking--or evidence of the decline and fall of Western civilization Noun 1. Western civilization - the modern culture of western Europe and North America; "when Ghandi was asked what he thought of Western civilization he said he thought it would be a good idea"
Western culture . Who can be indifferent INDIFFERENT. To have no bias nor partiality. 7 Conn. 229. A juror, an arbitrator, and a witness, ought to be indifferent, and when they are not so, they may be challenged. See 9 Conn. 42. , after all, about annual salaries that look remarkably like videogame arcade scores?
In theory, these top-level top-lev·el
1. Of or relating to people of the highest office or rank.
2. Of or relating to the highest office or rank: a top-level job. executive paychecks have always been a matter of public record, at least for companies that are publicly traded. But until recently, many companies were able to conceal conceal,
v to hide; secrete; withhold from the knowledge of others. executive salary data in financial reports so obscure that even Fortune Magazine complained they were "like deciphering hieroglyphics." The Securities and Exchange Commission last year finally stepped in and issued new guidelines guidelines,
n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. for compensation reporting; as a result, it's now possible to make valid comparisons of payroll trends across a broad spectrum of companies.
In the last few years, moreover, almost every major software company has finally made the transition to public ownership. There are still private firms whose executive paychecks remain a secret, but only one of these companies--WordPerfect--ranks among the industry's top 20. So 1993 seems like an appropriate time for Soft.letter to begin publishing an annual executive compensation survey. This issue represents our first effort in this area, and we're eager to hear suggestions about what else might be added to next year's version.
This year's Soft.letter Executive Compensation Survey includes paycheck data on 220 executives at 49 public software companies, 38 of which also qualified as 1993 Soft.letter 100 firms. As compensation analysts often point out, executive paychecks are sometimes remarkably out of step with company profitability and growth, broad-based broad-based
Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased market trends, or any other "objective" measures of top-level performance. In reality, the top paychecks in a company more often reflect complex judgment calls by board-level compensation committees, rather than simple formulas. So it's probably not surprising that we find few big-picture trends or explicit correlations between compensation and company performance.
However, there are several other patterns that do emerge from our data:
* Raises: More often than not, top-level compensation fluctuates considerably from year to year, depending on performance, bonuses, or--sometimes--the mood of the board of directors. We were able to collect two-year salary and bonus data for a total of 125 executives; of these, 77 got raises in 1992, 41 took home smaller paychecks, and seven saw no change in earnings.
When we compare CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. raises to all other job titles, an interesting pattern emerges: CEO compensation increased and decreased at almost exactly the same ratio as everyone else's pay. Twenty-one CEOs got pay increases averaging 23% (excluding Ray Noorda's 432% raise from our calculations), and ten declined by an average of 29%. Meanwhile, 56 other executives earned raises averaging 36%, while 31 declined by an average of 21%. Chief executives in technology companies tend to be highly paid, but apparently they share very much the same fate as the rest of the management team when raises are handed out.
* The highest paid jobs: we categorized cat·e·go·rize
tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es
To put into a category or categories; classify.
cat 220 operating executives by primary job function: Chief executive officer, chief operating officer Chief Operating Officer (COO)
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , finance & operations, sales & marketing, product development, and division managers. When we compare median compensation levels for these categories, it's clear that executives with general management responsibilities--CEOs, C00s, and division managers--tend to earn more than high-level specialists in development, marketing, and operations. (This comparison probably also reflects the fact that Coo and division manager titles are more commonly encountered in larger companies, which tend to pay higher average salaries.)
Median 1992 Salary & Bonus Chief Operating Officer (17 salaries) $262,145 Chief Executive Officer (49 salaries) $242,442 Division Manager (30 salaries) $204,169 Product Development (46 salaries) $176,372 Sales & Marketing (33 salaries) $166,007 Finance & Operations (45 salaries) $151,147
* Long-term Long-term
Three or more years. In the context of accounting, more than 1 year.
1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. compensation: In addition to annual salaries and bonuses, a substantial percentage of senior executives--40%--received some form of long-term compensation during 1992. Usually, this income is the result of gains from stock options that an executive may have accumulated ac·cu·mu·late
v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates
To gather or pile up; amass. See Synonyms at gather.
To mount up; increase. over many years, so the actual amounts frequently exceed that year's regular compensation. (These gains also typically represent deferred compensation, since the options themselves may have been earned several years before they could be exercised.)
When we analyze long-term compensation according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. job function, it turns out that the percentage of participation does not vary significantly from one category to another, with two exceptions: An above-average number of sales and marketing executives (55%) took advantage of long-term compensation opportunities during 1992, while significantly fewer CEOs (24%) did so. (The CEO group includes a large number of company founders, who probably don't see much benefit from acquiring options on additional stock.) But in any case it's clear that long-term compensation -plays a huge role in establishing the competitive value of pay packages for top-level software executives.