It struck me at some point during last year’s proxy season that the little column in the Summary Compensation Table that showed the increase in the value of executives’ pensions or non-qualified deferred compensation (NQDC, think of that as a super-sized 401(k)) was showing some remarkably huge figures, particularly given the state of the economy.
Indeed, not so much NQDCs which were often invested in company stock, but SERPs (supplemental executive retirement benefits) seemed to be one of the few items of compensation that seemed unaffected by the downturn.
Of course this was only an impression, but it seemed remarkable how often it seemed to loom large when a CEO had not received any kind of cash incentive. All of a sudden, the increase in retirement benefits was the biggest single item of compensation.
So much for pay for performance.
So I thought I’d do a little digging to see if my impression was fantasy or reality.
The results are here where it seems that just over a tenth of CEOs in the S&P 500 who received no bonus received an increase in retirement benefits that just about made up for that fact in 2008. I checked to see if it happened in 2007. Yes, it did. But just once.
Now, I’m the last person to insist CEOs should be paid bonuses if they haven’t earned them. But I’m the first to complain if they are being compensated by the back door with pensions. This finding seems to confirm that pensions should be a thing of the past.
Paul Hodgson - Senior Research Associate
