World Business

After shareholders’ dismal 2008, incorporated boards are being watched closely season they decide whether to gift out traditionally huge bonuses

By Ben Steverman

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Chief executives of U.S. companies, used to receiving million-dollar bonus checks at the end of the year, should prepare to win by with a lot inferior this time around.

As corporate boards begin discussing 2008 honorarium awards, it is a near certainty that U.S. CEOs will make acquisition smaller checks—and many will not achieve bonuses at all. To blame are the plunge in the pillar market, the monetary push, the downturn in the economy, and also an environment that makes hefty bonuses toxic in the arena of public opinion.

Still, many wonder for what cause much boards will absolutely cut in the rear on one of their favorite ways of rewarding more advanced executives. A steep drop in bonus awards would be a marked contrast with previous years.

According to charged with execution compensation research firm Equilar, as lately as 2006, 96.6% of CEOs in the S&P 500 received a middle $1.9 the multitude in cash bonus compensation at the end of the year. As the financial crisis began in 2007, those figures fell something, by 88.4% of CEOs receiving median bonuses of $1.84 million.

No one knows how low bonuses could be off in 2008, or how rare they might be.

Nell Minow, co-founder of the Corporate Library, which focuses on corporate governance issues, says institutional investors are attention boards, and their compensation committees, carefully. "There will be very powerful calls for the ouster of comp committee members who do not cut back on bonuses this year," she says.

Board members know they’re being watched, say many consultants who specialize in executive compensation. In 2007, bonuses fell mostly upon a company-by-company basis, says Steven Hall, provident adviser of Steven Hall & Partners. "You’re going to mark everything from a thin to a dense state this year," Hall says, with "big time" declines in financial services and housing industries.

Many boards have no choice but to slit bonuses. At the sally of each year, most boards set and disclose specific criteria for yearend bonuses. If those benchmarks—which might include particular revenue or profit targets—aren’t met, no bonus is supposed to be paid.

Even allowing that principally benchmarks are met, the stage in this environment main use their discretion to limit or abrogate a bonus, says Lance Froelich, a compensation consultant and partner at BDO Seidman. Numbers might still observe O.K., he says, "but you can’t ignore the cash position of the company [or] the fact that shareholders possess been hurt."

It’session not just boards that are showing opposition to bonus payouts in 2008. CEOs also may want to limit their avow compensation—at least temporarily—for pretext’s sake.

Goldman Sachs (GS) Chief Executive Lloyd Blankfein and six other senior executives said last month that they would forego all bonuses in 2008, including both cash payouts and equity awards or options. A spokesman for the investment bank said it was the "right thing to do."

At the end of 2007, it appeared that Goldman was one of the best-run Wall Street firms and might withstand the reputableness crisis better than many rivals. Blankfein was the ninth highest-paid U.S. CEO in 2007, according to the Corporate Library. His cash reward was $30 very great number of his total $76.7 million pay. But Goldman’s dullard is down 68% in 2008, and, after the break-down of Lehman Brothers, Goldman was forced to turn itself into a syrtis holding company and apply for federal bailout funds.

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