Wall Street's bull run is helping to create staggering payoffs for CEOs cashing in stock options and shares issued at far lower prices.
Early 2013 proxy filings detailing 2012 compensation show a growing swell of CEOs reaping $50 million or more, gains that could prove unmatched in breadth and size since the Internet IPO craze enriched tech company executives more than a decade ago.
"Some of these numbers are obscene,'' says former compensation consultant John James, director of Pace University's Center for Global Governance, Reporting and Regulation. "But corporate directors have long had the attitude 'How do we make this guy feel that he's needed? We can't afford to lose him.'"
Stock options and restricted shares are key tools to attract, retain and reward employees. Options are designed so they increase in value as the underlying share price rises. If a stock option is awarded at, say, $10 a share and the stock price rises to $20, the holder could acquire shares and sell for a $10 pretax gain. Executives usually need to remain with a company for several years before restricted shares are vested.
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