Compustat Executive Compensation Database Mireia Gine Associate Director of Research hservices October 2, 2007
Objective A pass on the wide research topics that involve this dataset. Learn about ExecuComp content and structure. Learn the top issues or FAQs.
Motivation In 1992 the average CEO of SP500 firm earned $2.7 M. In 2000, the average pay hadincreased to over $14M. An increased of more than 400%. In relative terms: in 1992, CEO were paid 82 times the average earning of an average worker. In 2005, there were paid 369 times.
Three explanations 1. The adoption of stock based compensation packages since the late 1980s. Market based incentives to enhance productivity. 2. The fat cat explanation: CEOs are entrenched and have captive boards that allow this pay pyincrease. 3. The market for CEOs has changed: more demand for high talent. More competition for the top of the crowd.
Research Issues in Executive Compensation How is CEO compensation determined? Do incentives work? Which part compensates for talent, luck, rent extraction? Why has CEO pay increased so much over the last decade? Has the market for top talent changed? Does the pay increase reflect poorgovernance? What has been the evolution of the gender gap?
On ExecuComp Universe: 2,500 companies both active or inactive. S&P 1500 plus companies removed from the index but still trading. Data is collected from each company annual proxy DEF14A, which must be filed 120 days after the company s fiscal year end. How many executives? Up to 9, though most companies only report 5. How are they identified? EXECID is permanent id for each executive through out her career. CO_PER_ROL identifies executive/company combination. Data on executives: Individual characteristics: title, age, gender, date became/left as CEO. Compensation: Salary, Bonus, Restricted Stock Awards, Option Awards, Non Equity Incentive Plan, Deferred Compensation, Pension Plan. Shares Owned. Data on directors compensation (new!).
New Reporting Requirements FAS 123 FAS 123 (R) : Equity based compensation has to be expensed and be reflected in the financial statements based on fair value of the awards. Companies with fiscal year end after Dec 2005 have to adjust to new rules. All data available in the past continues to be available; NO info has been purged. DEF14A has new tables : Summary Compensation: discloses salary, bonus, stock awards, option awards, change in pension value other compensation. Option exercises and Stock vested. Plan Based Table: contains details on the option awards, on the restricted stock awards, and estimated payouts for equity and non equity incentive plans. Outstanding awards Table: information on unexercised options, stock that has not vested and equity incentive plan awards outstanding. Deferred Compensation Table: reports the executive or company contributions, earnings and withdrawals and account balances for the deferral programs. Pension Benefits Table: information regarding each plan of the company that provides payments in connection with retirement. Directors compensation: fees, stock awards, options awards, non equity incentive plan
ExecuComp Structure for 2006 fiscal year New data tables: AnnComp: summary compensation data + other. PlanBasedAwards : from proxy table of same name. OutstandingAwards: from the Outstanding Equity Awards table. DeferredComp: from the Deferred Compensation table. Pension: from the Pension Benefit table. DirectorComp: from the Director Compensation table. Old data tables. Only available for 1992 Reporting Format: Stgrttab: Stock Options Grants. Ltawdtab: LongTerm Incentive Plan Awards. Unchanged data tables: Cole, Cdirfin,Coperol, Person
ExecuComp in WRDS Dataset through Web query: Execcomp Anncomp, Stgrttab, Ltawdtab Cole, Cdirfin,Coperol, Person Datasets in WRDS Unix: /wrds/compustat/sasdata Execcomp, plus allthe rest: Deferredcomp, Directorcommp, OutstandingAwards, Pension, Planbasedawards, ex_black, exnames
SEC Proxy Filling DEF14A: New format Summary compensation table for EastmanKodak 2006 fiscal year end Change in Pension Value Non-Equity and Deferred Name and Fiscal Stock Stock Incentive Comp All Other Principal Position Year Salary (1) Bonus Awards (2) Options (3) Comp (4) Earnings (5) Comp (6) Total A. M. Perez Chairman & CEO 2006 $1,096,168 $690,525 (9) $1,399,982 $1,704,007 $ 0 $3,214,598 $ 269,020 $8,374,300 F. S. Sklarsky EVP, CFO (7) 2006 91,986 75,000 (10) 74,781 78,333 0 18,303 2,539 340,942 R. H. Brust EVP, Former CFO 2006 745,395 562,378 (11) 346,265 261,340 0 1,689,235 612,082 4,216,695 J. T. Langley SVP, President - GCG 2006 498,258 150,550 (12) 160,299 291,079 490,000 171,160 58,400 1,819,746 P. J. Faraci SVP, President - CDG 2006 518,188 130,572 (9) 179,631 381,227 0 319,305 42,614 1,571,537 M. J. Hellyar SVP, President - FPG 2006 484,843 130,634 (9) 211,734 279,322 0 1,102,430 10,349 2,219,312 Former Executive D. T. Meek (8) SVP, Director - GM&L 2006 258,711 125,550 (13) 115,681 402,276 0 25,214 1,576,084 2,503,516
SEC Proxy Filling DEF14A: old format Summary compensation table for Eastman Kodak 2005 fiscal year end
New tables in DEF14A Plan Based Awards table Boeing 2006 fiscal year end Estimated Future Payouts Under Non-Equity Incentive Plan Awards All Other Stock Awards: Number of Shares of All Option Awards: Number of Securities Exercise Price of Option Number of Units Grant Granted Stock or Underlying Awards Type of Award Date (#) Threshold Target Maximum Units (#) Opti ons (#) ($/Sh) Grant Date Fair Value of Stock and Option Awards Name W. James McNerney, Jr. Annual Incentive Award $1,487,500$2,975,000 $ 4,025,000 $ $ Performance Award 56,875 1,421,875 5,687,500 11,375,000 Stock Options 2/27/2006 261,000 74.45 6,003,000 James A. Bell Annual Incentive Award 294,065 588,130 1,176,260 Performance Award 12,675 316,875 1,267,500 2,535,000 Stock Options 2/27/2006 66,000 74.45 1,518,000 James F. Albaugh Annual Incentive Award 368,440 736,880 1,473,760 Performance Award 16,088 402,200 1,608,800 3,217,600 Stock Options 2/27/2006 66,000 74.45 1,518,000 Laurette T. Koellner Annual Incentive Award 260,345 520,689 1,041,378 Performance Award 6,600 165,000 660,000 1,320,000 St ock Options 2/27/2006 20,000000 74.4545 460,000000 Richard D. Stephens Annual Incentive Award 182,538 365,075 730,150 Performance Award 6,110 152,750 611,000 1,222,000 Stock Options 2/27/2006 28,000 74.45 644,000 MDSUs (1) 7,190 588,888 Alan R. Mulally(2) Annual Incentive Award 368,440 736,880 1,473,760 Performance Award 16,088 402,200 1,608,800 3,217,600 Stock Options 2/27/2006 66,000 74.45 1,518,000 MDSUs (1) 3,117 247,965
Option Awards Stock Awards Number of Securities Underlying Unexercised Service-Based Equity Incentive Options (#) Equity Awards Plan Awards Number of Shares or Market Value of Shares or Number of Unearned Shares, Units Market or Payout Value of Unearned Uni ts of Units of or Other Shares, Units Option Stock Stock Rights That or Other Exercise Option That Have That Have Have Not Ri ghts That Grant Price Expiration Not Vested Not Vested Vested Have Not Name Year Exercisable Unexercisable ($) Date (#) (1) ($) (1) (#) (2) Vested ($) (2) W. James McNerney, Jr. Equity Awards(3) 308,867 $ 27,439,744 $ Stock Options 2006 261,000(4) 74.4545 2/27/2016 2004 960 1,440(5) 43.12 5/03/2014 2003 1,680 720(6) 28.22 4/28/2013 2002 2,100 900(7) 44.13 4/29/2012 James A. Bell Equity Awards 46,528(10) 4,133,547 49,089 4,361,048 Stock Options 2006 66,000(8) 74.45 2/27/2016 2003 4,000 6,000(9) 26.88 4/21/2013 James F. Albaugh Equity Awards 58,012(13) 5,153,786 83,932 7,456,530 Stock Options 2006 66,000(11) 74.45 2/27/2016 2003 352 6,000(12) 26.88 4/21/2013 Laurette T. Koellner Equity Awards 47,652(15) 4,233,404 62,681 5,568,574 Stock Options 2006 20,000(14) 74.45 2/27/2016 Richard D. Stephens Equity Awards 31,617(17) 2,808,854 32,643 2,899,985 Stock Options 2006 28,000(16) 74.45 2/27/2016 Alan R. Mulally Equity Awards 95,281 8,464,795 Stock Options 1998 197,781 0 45.06 6/29/08 (1) The following table shows the aggregate number and value of unvested BSUs, Career er Shares, restricted stock, RSUs and MDSUs held by each of the offi cers as of December 31, 2006: Outstanding Equity Awards table at 2006 Fiscal year end: Describes the outstanding stock options and unvested stock awards held by officers as of Dec 31 st 2006. Number of Shares or Units of Stock Market Value of Shares or Units of Stock That Have Not Vested That Have Not Vested Career Restricted Career Restri cted Name BSUs Shares Stock RSUs MDSUs Total BSUs Shares Stocks RSUs MDSUs Total W. James McNerney, Jr. 0 0 308867 308,867 0 0 308,867867 $ 0 $ 0 $27,439,744 744 $ 0 $ 0 $27439 $27,439,744744 James A. Bell 13,019 10,655 0 22,854 0 46,528 1,156,608 946,590 0 2,030,349 0 4,133,547 James F. Albaugh 17,845 22,044 0 0 18,123 58,012 1,585,350 1,958,389 0 0 1,610,047 5,153,786 Laurette T. Koellner 13,889 14,405 0 0 19,358 47,652 1,233,899 1,279,740 0 0 1,719,765 4,233,404 Richard D. Stephens 6,614 10,281 0 0 14,722 31,617 587,588 913,364 0 0 1,307,902 2,808,854 Alan R. Mulally 0 0 0 0 0 0 0 0 0 0 0 0
OptionExercises andstockvested during 2006 Name of Executive Officer Type of Award Option Awards Stock Awards Number of Number of Shares Acquired Value Realized Shares Acquired Value Realized on Exercise on Exercise on Vesting on Vesting (#) ($)(1) (#)(2) ($)(1) W. James McNerney, Jr. Restricted Stock $ 82,133 $ 6,627,145 James A. Bell Options 9,294 312,337 BSUs 2,508 182,590 Performance Shares 64,807 5,387,858 James F. Albau gh Options 13,650 548,259 BSUs 7,662 557,782 Performance Shares 151,616 12,534,682 Laurette T. Koellner BSUs 6080 6,080 442,644 Performance Shares 108,285 8,958,966 Richard D. Stephens Options 12,890 346,102 BSUs 2,761 201,034 Performance Shares 48,455 4,019,079 Alan R. Mulally Options 22,819 644,413 BSUs 29,206 2,251,773 Performance Shares 173,574 14,346,275 Career Shares 26,951 2,155,293 MDSUs 21,103 1,678,915
Top Research Questions 1. What are the main aggregated g compensation items? New data. 2. Stock based compensation: how to identify a unique row. Difference between the aggregated and disaggregated data for restricted stock awards and option awards. 3. How is Black Scholes computed? 4. How does it link to other data sets? i.e. Governance sets.
1. Old Compensation Items Pre FAS 123 R: TDC1 & TDC2 were the two most encompassing compensation measures. Using the 1992 format: TDC1= Salary +Bonus+ Other Annual + Total Value Restricted Stock granted + Total Value Stock Options granted + Long Term Incentive Payouts + All Other Total Using the 2006format: TDC1=Salary + Bonus + Non EquityIncentive Using the 2006 format: TDC1= Salary + Bonus + Non Equity Incentive Plan Compensation + Grant Date Fair Value Stock Awards + Grant date fair Value of Option Awards + Deferred Compensation + Other Comp.
1. New Compensation Items: FAS 123(R) New compensation items are reported by companies. Hence only available from 2006 onwards. Total Compensation as Reported to SEC: (TOTAL_SEC) Salary, Bonus, StockAwards Awards, Option Awards, NonEquityIncentives Incentives, Pension and Deferred Compensation Changes, Other Comp. Cost recorded by the company on its income statement. Total_ALT1 same definition astotal_sec except thatstock & options are valued using grant date fair value. Compensation as of grant date. Total_ALT2 same definition i i as TOTAL_SEC except that stock & options are valued using stock vesting (SHRS_VEST_VAL) and value realized from option exercise (OPT_EXER_VAL). Actual compensation.
2. Stock based Compensation Items Firms may grant options and restricted stock several times a year. Hence, this type of compensation is delivered at an aggregated or disaggregated level. Aggregated variables: 1 record per (firm, co_per_rol, year) Disaggregated variables: produce several records for (firm, co_per_rol, year). Need to add ID variable. Before FAS 123 Options data GRNTNUM. FAS 123 Plan Based Awards table contains all disaggregated data. GRNTNUM applies for all types of awards reported in the table: i.e. shares, equity and non equity incentive plan awards and options. And all of these plans can have several instances.
2. Stock based Compensation: Options Stock options awarded during the fiscal year (executive level) OPTION_AWARDS_BLK_VALUE (before FAS 123) OPTION_AWARDS_FV (FAS 123, i.e. data from 2006 onwards) At companylevel? Companies do not report all stock options awarded to all employees. From the DEF14A filling can only be computed for executives. Options exercised during the fiscal year: OPT_EXER_NUM & OPT_EXER_VAL Optionsoutstanding outstanding : OPT_UNEX_EXER_EST_VAL: Estimated value of in the money unexercised vested options. (OPT_UNEX_EXER_NUM) OPT_UNEX_UNEXER_EST_VAL : Estimated value of in the money unexercised unvested options. (OPT_UNEX_UNEXER_NUM)
Aggregated and Individual Options Data Before FAS 123 Data from 1992 2005 plus few companies still reporting old format for 2006 fiscal year. Available via Web query. All data items in Execcomp. Aggregated Options data Individual Option data OPTION_AWA OPTION_AW CO_PER_R OL SALARY OPTION_AWA RDS_NUM RDS_BLK_VAL UE ARDS_RPT_ VALUE GRNTN UM NUMSECU R BLKSHVAL EXEC_LNAME YEAR 28409 375 106.251 293.073 66.227 1 66.667 157.584 Jaworski 2006 28409 375 106.251 293.073 66.227 2 39.584 135.489 Jaworski 2006 30178 365.28 173.334 401.205 291.137 1 73.334 164.831 Whiting 2006 30178 365.28 173.334 401.205 291.137 2 100 236.374 Whiting 2006 32109 265.035 56.25 130.28 94.413 1 40 85.078 Deranleau 2006 32109 265.035 56.25 130.28 94.413 2 12.25 32.618 Deranleau 2006 32109 265.035 56.25 130.28 94.413 3 4 12.584 Deranleau 2006 32110 263.333 510.417 1217.435 1036.274 1 160.417 360.566 Grewal 2006 32110 263.333 510.417 1217.435 1036.274 2 350 856.869 Grewal 2006 OPTION_AWARDS_NUM: Total number of stock options awarded during the year, as detailed in Plan Based awards. OPTION_AWARDS_BLK_VALUE: Aggregate value of stock options granted during the year valued using S&P Black Scholes Methodology. Applies to 1992 reporting format only. (OPTION_AWARDS_FV for FASB123 reporting) OPTION_AWARDS_RPT_VALUE: Aggregate value for all options granted during fiscal year as valued by company. Applies to 1992 reporting forma t only. GNTNUM: Grant Number Identifier (Stgrttab). NUMSECUR: Number of securities in the option grant. Applies to 1992 only. (Stgrttab). BLKSHVAL: Value of the option grant using the S&P modified Black Scholes Method. Applies to 1992 reporting format only (Stgrttab).
Aggregated and Individual Options Data FAS 123 Data for 2006 fiscal year only. Aggregated data available through Web query. Individual option data in Planbasedawards dataset. Details on individual options granted are reported in Plan Based Awards table. Name Grant Date Date Approved by Compensation Committee Estimated Future Payouts Under Equity Incentive Plan Awards (a) Target (#) Maximum (#) All Other Option Awards: Number of Securities Underlying Options (#) OPTS_GRT Exercise or Base Price of Option Awards ($/SH) (b) Closing Market Price on Grant Date Grant Date Fair Value of Stock and Opti on Awards FAIR_VALUE H. McGraw III 4/3/06 12/07/05 25,140 50,280 $ 2,906,687 4/3/06 12/07/05 196,058 $ 57.81 $ 57.51 $ 2,950,673 3/23/06 04/24/02 277,637 (c) $ 56.43 $ 56.64 $ 3,555,001 3/23/06 04/28/04 167,004 (c) $ 56.43 $ 56.64 $ 2,138,402 R. J. Bahash 4/3/06 12/07/05 12,233 24,466 $ 1,414,379 4/3/06 12/07/05 46,990 $ 57.81 $ 57.51 $ 707,200 D. Sharma 4/3/06 12/07/05 7,551 15,102 $ 873,047 4/3/06 12/07/05 29,003 $ 57.81 $ 57.51 $ 436,495 3/16/06 12/04/02 31,771 (c) $ 58.83 $ 59.05 $ 423,225 D. L. Murphy 4/3/06 12/07/05 7,551 15,102 $ 873,047 4/3/06 12/07/05 29,003 $ 57.81 $ 57.51 $ 436,495 3/14/06 04/30/03 17,799 (c) $ 55.84 $ 56.42 $ 225,857 K. M. Vittor 4/3/06 12/07/05 6,872 13,744 $ 794,541 4/3/06 12/07/05 26,395 $ 57.81 $ 57.51 $ 397,245 B. D. Marcus 4/3/06 12/07/05 3,460 6,920 $ 400,045 4/3/06 12/07/05 13,289 $ 57.81 $ 57.5151 $ 199,999999 GRNT_NUM: Identifies entry in table. Hence it can refer to any Equity and non equity plan! No longer count for number of options grants. When OPTS_GRT > 0, then entry corresponds to option grant. OPTS_GRT: Number of stock options granted Fair_Value: Grant date Fair value of stock and option Awards. SUM(OPTS_GRT)= OPTIONS_AWARDS_NUM Total number of stock options awarded during the year. SUM(FAIR_VALUE)= OPTIONS_AWARDS_FV Aggregate value of stock options granted during the year.
2. Stock Based Compensation: Restricted Stock Restricted Stock awarded during the fiscal year (executive level) RSTKGRNT (before FAS 123, only applies for 1992 format) STOCKAWARDSFV(FAS STOCK_AWARDS_FV 123, i.e. ie data from 2006 onwards) Stock vested during the fiscal year: SHRS_VEST_NUM & SHRS_VEST_VAL Restricted Stock Outstanding : STOCK_UNVEST_VAL : Aggregate market value of restricted shares held by executive (STOCK_UNVEST_NUM) NUM) Details on the stock awarded in Plan based table.
3. Black Scholes Option Valuation Methodology The basic instrument used for the determination of a stock option's estimated value at grant. The model features the input of six assumptions: 1. The exercise price, i.e., the price the executive must pay to exercise the option. specified by company in proxy statement, and assumed to be the market price per share at the time of grant. 2. The term of the grant. assumed to be granted on July 1 st of the year for which data is reported and the actual expiration date as reported in proxy. Then, the term is reduced to amount a 70% of the full term since executives rarely wait until expiration. 3. The estimated risk free rate of interest during the term of the grant. the approximate average yield that could have been earned in the particular year by investing in a U.S. Treasury bond carrying a seven year term. 4. The estimated stock price volatility during the term of grant. Use a 60 month volatility number. If the stock has traded for less than one year, we input the average volatility value for the S&P 1500. 5. The estimated dividend yield on the stock during the term of the grant. To measure past yields, we average dividend id d yields over a three year period.
4. How to link ExecuComp. Few firm characteristics are directly provided. Still, easy to link to Compustat Industrial by Gvkey. CRSP Pricing data: follow same procedure as any other Compustat tproduct. Use CCM to obtain Gvkey Permno link. Alternatively, use CUSIP to link both sets. IRRC Governance data. IBES Analysts Forecasts data. Link by CUSIP Thomson Institutional Ownership data.
Conclusions As of fiscal year 2006, Executive Compensation is reported under new filling requirements. More details regarding grant dates, fair value valuation and plan based awards. New director compensation items. Clarified the aggregate and disaggregate stock based compensation items. Compustat s Black Scholes methodology.