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Executive Pay Day

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HVS Executive Search, a specialist in executive search and compensation consulting in the retail, restaurant, gaming and hospitality industries, has surveyed the 2006 compensation packages of CEOs and CFOs of a number of major big-box, department store and specialty apparel chains.

The research, packaged in two separate documents—one for big-box and department stores and the other for specialty apparel—entitled “2007 CEO/CFO Compensation Report” issued at the year-end 2007, transforms often difficult-to-understand compensation packages into terms that facilitate comparisons of compensation structures.

Last year, the Securities and Exchange Commission (SEC) adopted rules requiring plain-English disclosure of annual compensation for executives. During 2008, the new rule will require companies to report 2007 compensation packages in plain English. (“Plain English” principles include short sentences, everyday language, active voice, tabular presentation of complex information, no legal jargon and no multiple negatives.)

Big-box and department store executive-compensation structures: The survey collected the 2006 salary, short-term incentive, long-term incentive, and other compensation for 39 CEOs and 38 CFOs in the big-box and department store chains. To analyze how compensation packages are structured, HVS also calculated median dollar amounts for each compensation component. Total median compensation for CEOs was $3,648,676. By comparison, total median compensation for CFOs was $1,939,698. The accompanying charts list total CEO compensation for the top five big-box and department store chains and the five top apparel chains.

The median structures look like this: the largest portion of CEO compensation comes from long-term incentives, which were 51% of total median compensation, or $2,376,718. Short-term incentive compensation was the second largest component, at 24% or $1,099,848. Base salary came in third at 21% or $960,000. Other compensation made up the remaining 4% percent or $212,110.

CFOs had slightly different percentages. Long-term incentives made up the largest portion of median CFO compensation, with 50% of total compensation, or $960,443. Base salary ranked second, with 26% of the total or $502,274. Short-term incentives came in third at 21% of total compensation, or $412,540. Other compensation made up the remaining 3%, or $64,441.

Compensation packages in specialty apparel chains: With certain exceptions (see Total Compensation charts on this page), specialty apparel chains pay their CEOs and CFOs less than big-box and department store chains, as one might expect. The important differences arise in the structure of compensation packages. The HVS survey permits comparison by once again calculating median amounts for total compensation and its four components (base salary, long-term incentives, short-term incentives and other) and then evaluating how the components fit together.

The median dollar amount for CEO compensation for specialty apparel chains is $2,122,511. The median for CFOs is $819,409. Here’s how the packages break down:

The largest component of CEO compensation in specialty apparel chains is long-term incentives, which make up 40%, or $849,172, of the package. Next is base salary at 33% or $700,000. Short-term incentives are third at 24% of the total, or $520,000. Other compensation is 3%, or $53,339.

The largest component of CFO compensation is salary, which represents 47% of the total package, or $386,606. Long-term incentives ranked second at 26% or $210,150. Short-term incentives make up 24% of the compensation package, or $198,446. Other accounted for the remaining 3%, or $24,202.

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