Executive Pay Overshadows Pensions, the Details

Posted by: Nanette Byrnes on September 02, 2009

More details are out on which companies spent more in 2008 on executive stock grants than on employee pensions, and other important expenses.

The study in The Analyst’s Accounting Observer that I wrote about yesterday has now been released to the press, and with it much more detail on the companies which prioritize options and restricted stock grants over other promises. The idea behind the report, its author writes, is partly to shed light on what is being put into stock compensation versus other obligations (like pensions) and opportunities.

Forty companies put more than five times their pension contributions toward stock grants, though all but two of them have plans that owe more than their current assets. And some companies with pension shortfalls put nothing at all into those plans last year, but still gave out stock compensation.

Among them: Telecom giant Sprint Nextel, with an $805 million pension shortfall, and 2008 stock grants of $142 million; High-end insurer Chubb, which saw its pension underfunding grow from $249 million in 2007 to $636 million in 2008, and issued $95 million in stock-based pay; and drug store chain CVS, with a $260 million pension hole and $169 million in stock grants or options.

As a group, the companies in the S&P 500 with pension plans contributed $39.8 billion to their pensions last year, the report’s author, Jack Ciesielski calculates, while giving out $64.4 billion in stock options and restricted shares. That’s the third year in a row pensions have lost out to stock compensation.

Both pension plans and the value of stock grants were hit by the stock market decline last year, but that the amount of new options granted in 2008 did not decline from the year before. Restricted stock grants actually rose 25% last year.

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Reader Comments

Bill

September 2, 2009 03:42 PM

The press focuses on how much execs receive in yearly compensation, but their retirement packages a humongous and because of the complexity of the disclosure rules are seldom reported completely.

Rick Arvielo

September 2, 2009 03:59 PM

Thanks for the information

Deeb

September 2, 2009 10:38 PM

One must assume that after paying mega exec comp the companies plan to dump their pension obligations on the taxpayer -- and B. Hussein Obama will gladly endorse the check.

Ed

September 3, 2009 02:54 PM

I'm "mad as hell" and wish I didn't have to take it any more. Greed, greed, greed!

Beed

September 3, 2009 07:48 PM

Deeb, like king George II would have done anything different?

Barbara

September 8, 2009 02:26 PM

The Pension Benefit Guaranty Corp., which insures the payment of defined benefit pensions up to a certain amount, is not designed to be bailed out by taxpayers. Its sources of revenue are premiums paid by plan sponsors and gains on its investments, not tax revenues. Its liabilities far exceeded its assets as of May 2009 (see www.pbgc.gov) but that was largely a result of increased plan terminations and low interest rates that resulted in larger benefit payments to employees in terminated plans.

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September 9, 2009 08:05 AM

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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.

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