CEOs prefer bonuses to base pay

HVS International’s annual survey of public U.S. hotel company CEO performance reveals that CEOs took smaller salaries or declined salary increases in favor of more bonus pay.

HVS reported that base pay as a percentage of total pay declined from 18% in 2009 to 13% in 2010. In contrast, bonus pay increased from 27% to 32%, while equity pay stayed unchanged at 45%. In concept, most pay-for-performance advocates should be pleased, opined HVS Executive Search’s Keith Kefgen and Andrew Hazelton.

Click here to see survey results and CEO compensation

In dollar terms, the average CEO base salary dropped nearly US$50,000 to US$700,000 in 2010. In addition to a number of CEOs taking smaller salaries, Jeffrey Fisher of Chatham Lodging, James Francis of Chesapeake Lodging Trust, Warren Haruki of Maui Land & Pineapple and John Eliassen of Red Lion Hotels where all newcomers to the survey this year and earned below average base salaries.

Both bonus pay and long-term incentives were on the rise in 2010, which helped bolster overall CEO compensation. The average bonus jumped from US$1.1 million in 2009 to US$1.7 million in 2010. While not true hoteliers, Robert Iger of Walt Disney, Richard Fain of Royal Caribbean and Jeffrey Boyd of received the largest bonuses, with Iger earning a US$13.5 million bonus in 2010. Eleven other CEOs received bonuses in excess of US$1 million in bonus pay while five CEOs received nothing.

Long-term incentives shifted upwards from an average of US$1.8 million in 2009 to and average of US$2.3 million in 2010. Iger, Bill Marriott and Edward Walter of Host Hotels & Resorts received the largest amount of long-term incentive pay. An interesting note is that out of the 31 CEOs in the HVS survey more than half of them, 19 to be exact, received below average long-term incentive pay in 2010. Long-term wealth seemed to be concentrated in very few hands, according to Kefgen and Hazelton.

As previously stated, overall CEO pay increased due to larger incentive packages. When combining all components, the average CEO pay package in 2010 was US$5,262,000 as compared to US$4,124,000 in 2009. Bill Marriott and Micky Arison of Carnival remained the ‘richest’ CEOs in the industry with both having a net worth of over a billion dollars.

There are various ways to determine value and HVS created the Pay-For-Performance Index to determine which CEOs, relative to their pay, provided shareholders the biggest bang for the buck. The model compares CEO compensation to such indicators as stock appreciation, market capitalization, and increases in EBITDA or FFO, to determine the top-performing CEO.