Those property/casualty insurance carrier chief executives who saw lower increases in their pay levels in 2012 than in 2011 had plenty of company, according to a report from Towers Watson.

Growth in compensation for CEOs at the nation’s largest corporations slowed considerably in 2012, the global professional services company said, basing the assessment on a new analysis of proxies.

The Towers Watson analysis found that total pay for CEOs increased just 1.2 percent in 2012, down from the 6.7 percent median increase CEOs received in 2011.

Towers Watson said the decline reflects weakening company financial performance last year.

The analysis, however, did not include any compensation information for any insurance company CEOs. Towers Watson said the analysis is based on 270 S&P 1500 companies that filed proxies disclosing 2012 pay by late March.

Total pay, as reported in the Summary Compensation Table in company proxy statements, includes base salary, actual annual and long-term cash bonuses, and the grant-date value of long-term incentives including stock options, restricted stock and long-term performance shares.

The smaller increase in total pay was driven largely by a steep decline in annual bonuses, Towers Watson said.

While salary increases declined slightly last year—from 3.0 percent in 2011 to 2.8 percent in 2012 — annual bonuses paid to CEOs dropped by 16 percent at the median, compared to 2011, when bonuses were relatively flat.

Target long-term incentives, the largest component of executive pay in major companies, were up 5.6 percent at the median in 2012.

The analysis also revealed that the percentage of CEOs who received bonuses that were at or below target levels increased from 47 percent in 2011 to 58 percent last year. This can be mostly attributed to a significant slowdown in sales and earnings that companies experienced in 2012, Towers Watson concludes.

“The fact that many CEOs saw their bonuses take a significant hit and Summary Compensation Table pay was relatively flat suggests the companies and their boards took a conservative approach to pay in 2012,” said Todd Lippincott, leader of Executive Compensation consulting at Towers Watson for the Americas.

One of the most noteworthy shifts in executive compensation is the continuing growth in performance-based long-term incentive plans. Almost half (44 percent) of S&P 1500 companies now have long-term performance plans in place, according to the Towers Watson analysis. Total return to shareholders is now the most prevalent performance metric that companies use to base long-term incentive plan awards. Forty-one percent now use this measure, compared with just 18 percent that used this metric in 2008.

Earnings per share, historically the most prevalent measure, is now used by 40 percent of companies.

Say-On-Pay Votes Analyzed

The analysis also found that in the third year for mandatory say-on-pay votes, 160 of the Russell 3000 companies that have disclosed their shareholder voting results so far reported average support of 90 percent of the votes cast this year. This is consistent with last year’s voting results.

“While the say-on-pay experience has been positive for most companies, we continue to see a small number of cases in which shareholders use the vote to send companies a message about pay and performance,” Lippincott said. “Our research shows that companies with poor shareholder returns were five times as likely as other companies to receive low say-on-pay support, while those with high CEO pay opportunities were eight times as likely.”

Source: Towers Watson