Human Resources: CEOs See Strong Bonuses, Equity Gains, Watson Wyatt Analysis Finds

WASHINGTON, April 5, 2007 – Chief executive officers at the nation’s
largest companies saw their annual bonuses increase 13 percent and the
value of their equity-based compensation holdings grow nearly 50 percent
last year, according to an analysis of proxy statements conducted by Watson
Wyatt Worldwide, a leading global consulting firm.

“Corporate America enjoyed a banner financial year in 2006,” said Steve Van
Putten, a senior executive compensation consultant at Watson Wyatt. “CEO
pay moved in step with corporate earnings and stock prices, reflecting the
trend toward performance-based compensation.”

According to the analysis, median annual bonuses for CEOs increased 13
percent to $2.2 million last year. At these same companies, the median
growth in earnings per share was 14 percent. Earnings per share is a
commonly employed performance metric in annual incentive programs. Base
salaries also grew by a more modest 4 percent to a median $1.1 million.
The proxy analysis is based on 92 large companies whose CEOs remained in
their positions in 2005 and 2006.

The analysis also found that the median value of CEOs’ equity compensation,
which includes in-the-money stock options and restricted stock awards,
increased 48 percent last year to $30.2 million. This was fueled in part
by the 18 percent increase in total returns to shareholders (TRS) last
year. For CEOs at high-performing companies (those with a median 30
percent TRS), equity compensation nearly doubled last year to $31.3
million, while CEOs at low-performing companies (7 percent TRS) saw their
equity compensation increase by 13 percent to $25.3 million.

“The correlation between realizable pay – the value of outstanding
long-term incentives granted to executives over a specific time frame – and
company performance remains as strong as ever,” said Ira Kay, global
director of compensation consulting at Watson Wyatt. “It is also a good
reminder that, because stock options are highly leveraged, even a small
increase in stock price appreciation can lead to an increase in value for
other CEOs.”

Kay and Van Putten’s book, Myths and Realities of Executive Pay, is being
published by Cambridge University Press and will be available this summer.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE: WW) is the trusted business partner to the world’s
leading organizations on people and financial issues. The firm’s global
services include: managing the cost and effectiveness of employee benefit
programs; developing attraction, retention and reward strategies; advising
pension plan sponsors and other institutions on optimal investment
strategies; providing strategic and financial advice to insurance and
financial services companies; and delivering related technology,
outsourcing and data services. Watson Wyatt has 6,000 associates in 30
countries and is located on the Web at www.watsonwyatt.com.

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