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March 08, 2004
Report: CEOs Should See Better Compensation

A sharp increase in the value of unexercised stock options and a rise in bonuses and base salaries should make 2003 a good year for chief executive officers' pockets, according to a preliminary analysis by Watson Wyatt Worldwide.

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The firm examined 57 companies that have already filed proxies and found that the "in the money" value -- when stocks are trading above the option's exercise price -- of unexercised stock options jumped 53 percent from a median of $5.4 million in 2002 to $8.3 million in 2003.

The analysis also revealed that annual bonuses increased 13 percent to an average of more than $1 million. Base salaries increased 8.3 percent to an average of $818,000.

The researchers say the rise in pay levels may be short-lived.

"After two consecutive years of declining pay, 2003 should prove to be a much more rewarding year financially for CEOs, due to the rising stock market and improved corporate performance," says Ira Kay of Watson Wyatt. "But with the accounting expense for stock options looming, this may be the last spike in option-related compensation. We expect companies to move away from using primarily stock options to using a portfolio of equity plans that will be only partially comprised of stock options."

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