AVERAGE CEO COMPENSATION FOR 2008 WAS $10.4 MILLION

2009

THE FORTUNATE 2500 OF THE FORTUNE 500

*See the 2009 List* - See the 2008 List - See the 2007 List - See the 2006 List - See the 2005 List

In the last eighteen months both the US and world economies went into a steep recession. As a result, revenues, profits and compensation to executives of the Fortune 500 companies dropped accordingly. The drops were considerable. Average CEO's compensation for 2008 was approximately $10.4 million. This was a decrease of 14.8% from the prior year's $12.2 million average. While this was a significant drop, in the eyes of many, CEO pay is still very high by historic measures.

In addition to the CEO, all public companies have at least four other (named) executives who report to the CEO. Many of these executives are also receiving exorbitant pay packages.

The following is a commentary on the pay of the top 2,500 executive positions of the Fortune 500 companies. Except for the top 10 CEOs who are highlighted at the top of the grid (see the link), the names of the others are not given. The list is named "The Fortunate 2,500 of the Fortune 500." Fortune Magazine annually publishes, the "Fortune 500" with information on the 500 largest companies in the United States. Fortune Magazine is a unit of Time Warner Communications (incidentally, number 48 on the list). All information included on the list comes from the companies' proxy statements filed with the SEC.

As written before, in addition to the list of the 500 companies, the grid also lists the Top Ten CEOs by compensation, the Top Ten Companies and new for 2008, the Top Ten Women CEOs by pay.

The list was obtained from the proxies filed in 2009 and 2008 for calendar year 2008 or fiscal years ending in 2009. Some of the proxy information was unavailable or nonexistent as a result of bankruptcies and mergers. In those cases I used, if available, proxy information from either a previous year or subsequent year. Information on 49 companies was unavailable. These companies were either private, in bankruptcy, part of a merger or spin-off, or were insurance companies not required to file the relevant proxy statement, DEF-14A with the SEC.

In some cases, where CEOs were fired, or retired during the year, I combined the pays of the two CEOs who worked for those companies and show them as if only one CEO was paid. The compensation included base pay, bonuses, long-term stock payments, restricted stock awards, changes in pension values, non-qualified deferred compensation earnings and miscellaneous "other types" of executive perks.

Company stock, including the present value of stock options, stock awards, and the issuance of restricted stock accounted for the largest part of executive compensation. Stock options generally are not exercisable for a period of ten years. However, the company assigns values to these options using the Black-Sholles method or a variant of that.

Out of the 500 companies in the Fortune 500, information was available for only 451. The total compensation paid to this group in the year 2008 was $11 billion, or an average of $4.9 million per executive($5.8 million in 2007). The average CEO compensation was $10.4 million ($12.2 million in 2007). The average compensation of all workers in the United States in 2007 was approximately $53,900 (Bureau of Economic Analysis). Therefore, the 451 CEOs earned 193 times the average worker in the US. Putting that in perspective, the average CEO, earned in two work days more money than the average worker earned in all of 2008.

In 2008, thirty-five companies paid their top five executives more than 10% of their annual profits (50 companies in 2007). One hundred five other companies incurred losses in 2008, a huge increase over 2007. Net profits of the Fortune 500 companies were $99 billion in 2008 vs. $645 billion in 2007. That's an 84.7% decrease from the prior year. CEO pay decreased by14.8% during the same period. The huge drop in profits occurs because net incomes and losses are netted on the grid. The recession certainly took its toll on profits but losses of some companies were exacerbated by the financial meltdown of 2007-2009. For instance, the five companies AIG, Fannie Mae, Freddie Mac, Merrill Lynch and Citigroup had combined losses totaling $263 billion in 2008.