S&P 500 CEOs: WINNERS AND LOSERS DURING A
VOLATILE 2011 STOCK MARKET
Aggregate Value of Outstanding Equity Awards for S&P 500 CEOs Up +1.2%
Change in Aggregate CEO Outstanding
Equity Awards vs. Market Capitalization
•
Collectively, the value of outstanding equity awards for the S&P 500 CEOs increased
+1.2% in 2011, erasing midyear swings of +22% in April and -16% in September.
•
The aggregate market capitalization for these companies decreased -1.1% during the
same period, according to a recent Steven Hall & Partners study.
Total Outstanding Equity
Market Capitalization
30%
+22.1%
20%
10%
+8.5%
+1.2%
0%
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
-10.3%
-10%
-16.4%
-20%
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Oct-11
Nov-11
Dec-11
-1.1%
Winners & Losers
•
While the data shows an increase for the group as a whole, there were actually more
‘losers’ than ‘winners’ in 2011. Of the 496 CEOs analyzed in the study:
– 232 (48%) gained an average of $12.8 million
– 255 (52%) lost an average of -$10.8 million
Change in Value of Outstanding Equity Awards
High
Low
End of Year
Apr-11
Sep-11
Dec-11
# of CEOs
Average
Median
496
+$7,748,282
+$3,555,139
496
($5,748,503)
($3,179,431)
496
+$415,024
($186,551)
# of Winners
Avg. Gain
404
+$10,299,143
141
+$9,024,210
232
+$12,809,884
10
10
9
82
($3,874,464)
345
($11,952,670)
255
($10,847,221)
# of No Change
# of Losers
Avg. Loss
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Majority of Gains & Losses Concentrated
Among a Few CEOs
•
The largest gains and losses were concentrated among a handful of CEOs
– Due primarily to changes in unexercised option value
– Of the 232 CEOs whose wealth increased during the year, more than half the
gains came from just 32 individuals
– Among the 255 CEOs who lost value, more than half the losses observed came
from 22 CEOs.
# of CEOs
Aggregate Gained
Average
# of CEOs
Aggregate Lost
Average
Top Winners
Rest of the Winners
32
200
$1,485,999,915
$1,485,893,214
$46,437,497
$7,429,466
Top Losers
22
($1,390,353,984)
($63,197,908)
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Rest of the Losers
233
($1,375,687,384)
($5,904,238)
Stock Options = Leverage
•
Over 60% of the gains and losses among the group came from changes in
unexercised stock option value
•
The leveraged nature of stock options can result in significant gains if long term stock
price increases are attained
•
Conversely, if the stock price falls below the exercise price, the option loses all of its
value
Average Change in Value of Equity Vehicles as % of
Change in Total Outstanding Equity Value
Winners
Losers
R/S
33%
R/S
36%
Options
64%
Options
67%
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Our View
•
Our analysis reinforces the need for companies to develop balanced long-term
incentive portfolios consisting of
– Stock options
– Time-vested restricted stock
– Performance-vested vehicles
•
Boards can ensure that executives remain focused and engaged on delivering
returns to shareholders over the long-term by making regular annual awards
consisting of
– Multiple vehicles
– Differing vesting schedules
– Complementary performance metrics
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About the Study
•
Analyzed equity held by CEOs as disclosed in proxy statements filed in 2011 for
companies listed in the S&P 500 on December 31, 2011
– Excludes four companies that went public during the year
•
Equity Valuation
– Stock Options calculated as the difference between month-end stock prices and
the option exercise price multiplied by the number of options held
– Full value awards valued by multiplying stock price by the number of shares held
•
For additional details regarding the study, please contact Steven Hall Jr.
– 212-488-5400
– [email protected]
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About Steven Hall & Partners
Steven Hall & Partners is an independent executive compensation consulting firm serving
as outside counsel to Boards, Compensation Committees and management. The firm
focuses solely on executive compensation, Director remuneration and related corporate
governance matters.
For more information
Web: www.shallpartners.com
Email: [email protected]
Phone: 212.488.5400
Twitter: @SHallPartners
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