CEO Pay Growth Drops; Signals Economic Unrest

Data just released by the management consulting firm Hay Group, Philadelphia, indicates a decline this year in the rate of increase in CEO compensation. Based on information representing about 10,500 U.S. executives in more than 600 organizational units, the Hay Group Executive Compensation Report shows just under 14% growth in 1998. "For the last 13 years, we've been seeing an annual growth rate in CEO compensation of about 17%," says Webb Bassick, managing director of executive compensation for the Hay Group. "In fact, last year it was 20.7%. This means that there has been a 30% decline from last year in the rate of increase, which is significant, and we project that this decline will continue for the balance of 1998." Bassick believes the decline reflects early warning signs of the growing global economic crisis and market volatility. The report also shows that the highest average annual increases in compensation were for group heads (15.1%, up from 9.5%), CFOs (12.5%, up from 9.6%), and heads of research and design (14.3%, up from 7.9%).

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