CEOs rely less on stock options

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Incentive pay tied to share price growth and other measurements lifted CEO compensation a relatively modest 9.1% in 2004 over 2003, according to corporate proxy information collected by Advertising Age.

The data cover 221 executives who lead publicly held corporations ranked in Ad Age`s 100 Leading National Advertisers, 100 Leading Media Companies, Agency Report and a set of not-for-profits addressing the marketing industry.

Of the $1.69 billion in total compensation drawn by these executives, 37.5% came from realized gains in stock options, 13.4% from long-term incentive stock awards and 6% in long-term incentive pay, or almost 57% of total compensation. Not included in these figures, because of a skew factor, are $230 million in options cashed by Yahoo Chairman-CEO Terry Semel. Those options would make the group's overall compensation rise 22%.

Stock options, the primary form of pay for most of these executives, typically are much higher than 37.5% of their compensation (56% in 2003), but options weren't heavily exercised in 2004 because stock prices were lower than the exercisable price of the options. Stock options bear a fixed price and are only cashed in when the stock's current share price rises above the option price. Only 77 of the executives cashed in options. In 2004, these executives got more than 57 million new options.

Salaries rose a modest 5.7% over the previous year to a median of $950,000, accounting for just 13.3% of the group's total compensation. Bonus, skewed by several large awards, amounted to 1.7 times salary pay. Median compensation package was $3.4 million for the group.

This CEO pay list is rife with anomalies, thanks partly to Silicon Valley, the prime case being Mr. Semel's exercising of those 10.1 million shares, and Apple Computer's Steve Jobs, who drew has annual $1 in salary. He owns 1.23% of Apple's common stock (a current value of $688.2 million).

Then there's Eric Schmidt, chairman-CEO of Google, who drew total compensation of $86,000. He holds 10.6% of Google voting stock, which on paper is worth $5.9 billion.

The list that follows highlights 163 executives from the 221 surveyed. The larger set can be found at QwikFIND aar17p.