Korn/Ferry Executive Compensation Index Shows Declining Pay for Newly Placed Senior Executives in 2009
LOS ANGELES, Nov. 19 /PRNewswire/ — Korn/Ferry International (NYSE: KFY), a premier global provider of talent management solutions, today released results of a five-year analysis focused on compensation for newly hired executives. The Korn/Ferry Executive Compensation Index shows declining pay in 2009 for the majority of new senior executives around the world after reaching a peak in 2008. The study shows that pay for first-year CEOs also declined in the North American and Asian markets in 2009, but increased in Europe, raising the global average CEO compensation to a five-year high.
“The data in our Executive Compensation Index illustrates the downward pressure impacting senior executive pay in 2009. This trend reflects a movement towards more performance-based compensation models for senior executives that weights deferred compensation such as stock options more heavily,” said Gary Burnison, CEO, Korn/Ferry International. “While top companies will always attract top talent, it is clear that the ailing economy and heightened scrutiny over executive compensation had a noticeable effect on the corporate landscape.”
Significant takeaways from the Korn/Ferry Executive Compensation Index include:
- In 2009, compensation for first-year executives declined globally for the first time in five years. The index decreased from 131.0 to 121.4, or -7.3 percent.
- CEO pay declined in both North America (from 122.1 to 113.5, or -7.0 percent) and Asia (from 122.8 to 114.0, or -7.2 percent), but increased in Europe (from 98.4 to 112.8, or +14.6 percent) contributing to an overall increase in global CEO compensation (from 109.4 to 111.6, or +2.0 percent). However, 2009 was the first year that European CEO compensation surpassed the 2005 base year.
- CIO/CTO positions saw the greatest growth over the five-year study, increasing year-over-year to a high of 135.7 in 2009, or +35.7% since 2005.
- Geographically, executives in Asia saw the largest increase in compensation, climbing to 136.2 in 2009, or a 36.2 percent increase. European executives, however, totaled the lowest growth in compensation at just a 4.5 percent.
Global First-Year Executive Compensation (2005-2009)
Increase in First-Year CEO Compensation by Geography (2005-2009)
The Korn/Ferry Executive Compensation Index mirrors other indexes which predominantly focus on CEOs at companies publically traded on U.S. exchanges. For example, average North American CEO pay fell by 5.1 percent between 2007 and 2008 according to the Korn/Ferry data. This aligns with data from the Wall Street Journal/Hay Group that showed an 8.5 percent decrease in median CEO compensation at the top 200 U.S. companies in 2008. And the New York Times/Equilar found a 9.5 percent decrease in median compensation for chief executives at 200 public companies between 2007 and 2008 as well. However, the Korn/Ferry methodology, which tracks first-year compensation for newly placed executives, shows that CEO pay actually bottomed out in 2007, falling to 96.6 on the index, and actually increased globally in 2008 and 2009.
The index analyzes the first-year salary and bonus for executives placed by Korn/Ferry globally, using 2005 as a base year. The index score allows for comparisons between titles and across geographies. Data from Asia, Europe and North America is analyzed and aggregated to determine global trends. The study breaks out data by title in the C-suite including CEO, CFO and CTO/CIO. Senior vice presidents or equivalent titles are added to the C-suite for a cumulative index score which provides a full picture of executive compensation.
About The Korn/Ferry Institute
The Korn/Ferry Institute was founded to serve as a premier global voice on a range of talent management and leadership issues. The Institute commissions, originates and publishes groundbreaking research utilizing Korn/Ferry’s unparalleled expertise in executive recruitment and talent development combined with its preeminent behavioral research library. The Institute is dedicated to improving the state of global human capital for businesses of all sizes around the world.
About Korn/Ferry International
Korn/Ferry International, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions celebrating 40 years in business. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, develop, retain and sustain their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute.com for thought leadership, intellectual property and research.
SOURCE Korn/Ferry International