Since CEOs perform a vital role in influencing profitability, firms put significant thought into their compensation. Total CEO compensation generally consists of 18% salary, 24% bonuses and 58% long-term incentives. Long-term incentives are used to motivate and reward CEOs for long-term corporate growth and shareholder value (Dessler).
For instance, Mark Fetting, CEO and Chairman of Legg Mason, earned $5.9 million during the past year. The 5.9 million consists of $500,000 salary (8.4%), $2.9 million bonus (48.7%), $1.9 million stock awards (32%), $625,000 stock options (10.5%), and $21,272 other compensation (.4%). In summary, Fetting earned a salary of 8.4% of total compensation, bonuses of 48.7%, and long-term incentives of 42.9%.
To read more about Fetting’s 2010 compensation, read Hanah Cho’s article in the Baltimore Sun called “Legg CEO receives 28 percent pay raise” http://articles.baltimoresun.com/2011-06-01/business/bs-bz-legg-executive-compensation-20110601_1_legg-ceo-legg-shares-equity-awards