June 2, 2004—FPL Associates Compensation (FPL), a provider of compensation consulting for the real estate industry, recently announced results of its study of compensation trends for senior executives and Board members at the Top 100 publicly traded real estate companies. The study focused on the most common senior executive positions found in the recently filed proxies for the Top 100: CEO, COO, CFO and General Counsel.
FPL’s study revealed that the combined median total compensation (inclusive of base salary, annual incentive awards, and the value of long-term incentive awards) for the team consisting of CEO, COO, CFO and General Counsel at the Top 100 increased 21% to $4.7 million, up from a median of $3.9 million in 2002. Contributing to the gains in total compensation were annual incentive awards, which on average, increased 30% in 2003 when compared to 2002.
Considering that the median total shareholder return for the Top 100 in 2003 was 37%, up significantly from 7% in 2002, it appears that a positive relationship exists within the real estate industry between senior executive compensation and the companies’ actual performance. Further, 2003 marked the fourth consecutive year in which the overall real estate industry achieved positive total shareholder returns and outperformed the broader market indices.
From 2002 to 2003, the median total compensation for CEOs increased 25% to $2.0 million from $1.6 million. For COOs, the median total compensation increased 9% to $1.2 million from $1.1 million and the General Counsel saw median total compensation increase 19% to $680,000 from $572,000. Most notably, however, was the increase for the CFO, whose 2003 median total compensation increased 30% to $879,000, up from a median of $674,000 in 2002.
“These increases in compensation are not surprising considering the strong stock market performance of the real estate industry over past years and the pay-for-performance management systems that have been implemented at a large majority of these companies,” commented Kevin Christenson, Managing Director of FPL Associates Compensation.
FPL also noted that for those companies granting long-term incentive awards, the percentage of companies granting options decreased to 51% in 2003 from 64% in 2002, whereas, the percentage of companies granting restricted stock increased to 80% in 2003 from 70% in 2002.
Consistent with the senior executive compensation trends, more companies shifted to restricted stock as their annual equity vehicle of choice for Board compensation. In fact, during 2003, for those companies offering their Board members an annual equity award, the percentage of companies granting options and restricted stock was 58% and 59%, respectively, compared to 2002 levels of 73% and 40%, respectively.
For more information, visit FPL Associates.
