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average of CEO salary and bonus was $2.3 million. Virginia pay committees still


are tinkering to find an appropriate balance between pay and perfor- mance, says Dan Marcec, an Equilar director of content and marketing communications. But weighting a CEO’s compensation against corpo- rate achievements is harder than it sounds. “We have seen a big shift away


from awards that vest based on years of service and a move toward greater use of performance-based shares. And these performance awards are becoming more complex. Boards are basing them on different elements of the business (in an effort) to more accurately capture the holistic nature of their CEO’s responsibilities,” Marcec says. By and large, pay strategies in


Virginia reflect general trends that industry experts have witnessed across U.S. public companies. In a separate Equilar study in May, known as the Global CEO Pay Trends 2016 report, use of performance awards at S&P 500 companies increased from 62.5 percent in 2011 to more than 80 percent in 2015. During the same five-year period, use of time-vesting option awards decreased from 69 percent to 54 percent. Global consulting firm Mercer


reported similar findings in August. Total compensation for S&P CEOs ticked downward from $10.6 million in 2014 to $10.3 million in 2015 — the first such drop in five years. The $300,000 pay difference year to year exactly parallels the fall in median revenue among companies, which Mercer said declined from $9.7 bil- lion to $9.4 billion. “It was a small downtick, but it


was a downtick nonetheless. It has to do with lower short-term incentives and lower bonuses (being awarded) in 2015, since there was lower profitabil- ity across many sectors,” says Gregg Passin, a senior partner in New York City with Mercer’s North America executive rewards practice. How does a Virginia CEO’s


pay stack up nationally? It’s a ques-


Top ten paid CEOs in 2015


Of 46 public companies in Virginia with annual revenues of nearly $1 billion or more in 2015, these CEOs had the highest total compensation.


Total Company


1 Computer Sciences Corp. 2 General Dynamics Corp.


CEO


J. Michael Lawrie Phebe N. Novakovic


3 Capital One Financial Corp. Richard D. Fairbank 4 Northrop Grumman Corp.


Wesley G. Bush 5 Altria Group


6 Hilton Worldwide 7 Verisign Inc. 8 CarMax Inc.


Martin J. Barrington


Christopher J. Nassetta D. James Bidzos Thomas J. Folliard


9 Dominion Resources Corp. Thomas F. Farrell II 10 Dollar Tree


Bob Sasser


tion bound to yield an imprecise comparison, but in terms of average pay, Virginia CEOs earned less than their S&P peers. That’s according to another Equilar study in May con- ducted with The New York Times. The analysis of the 200 largest S&P firms found those CEOs reaped a cool $19.3 million in 2015. And that actually represents a 16 percent year- over-year decline in total comp. The uncertainty of the U.S.


stock market is expected to keep raises flat for U.S. employees, who can expect an average pay hike of 3 percent in 2016, according to a salary budget survey by WorldatWork, a Washington, D.C., trade group for human resource professionals. That’s better than nothing, but annual worker raises have been stuck at 3 percent since 2014. On a larger scale, public


companies across the U.S. face a new challenge heading into 2017: transparently disclosing the ratio of a CEO’s pay to that of rank-and-file workers. The new rule was put in place last year by the U.S. Securities and Exchange Commission and is scheduled to take effect next year. A lagging provision of the Dodd-Frank Wall Street Reform and Consumer


www.VirginiaBusiness.com


compensation (in millions)


$23.8 20.4 18.0 15.8 10.7 10.2 10.1 10.0 9.7 9.5


Protection Act, it will require cor- porations in required SEC filings to compare their CEO’s compensa- tion to the median pay of all other employees. A separate SEC rule has been tabled that would require public companies to disclose how they define pay for performance. Reflecting the continuing empha-


sis on rewarding performance, 39 of the 46 Virginia companies granted equity awards to their CEOs. Only three CEOs received milestone cash related to long-range incentive plans. And while it hasn’t curbed execu- tive pay packages, Equilar’s Marcec says nonbinding advisory votes by shareholders — the so-called “say on pay” rules created by Dodd-Frank — are gradually having impact on pay strategies. “It’s a mandatory shareholder


vote every year that gives a company the temperature of how their inves- tors feel about executive pay. Say on pay has opened a lot of dialogue, some of it constructive and some of it challenging. But it’s definitely changed the way committees try to align the CEO’s pay to what investors expect,” Marcec says. New companies on this year’s list include American Woodmark,


VIRGINIA BUSINESS 69


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