WASHINGTON, Nov. 12 /PRNewswire-FirstCall/ -- Chief executive officers at the nation's largest companies saw the value of their company stock ownership plunge last year as the U.S. equities market declined, according to an annual study by Watson Wyatt, a leading global consulting firm.

"When the economy prospers and the stock market does well, executives reap the rewards. But when markets decline, executives also suffer financial setbacks," said Ira Kay, global director of executive compensation consulting at Watson Wyatt. "The financial crisis and market downturn in 2008 bear this out. Even under extreme circumstances, we found that the executive pay-for-performance model is working as intended."

The Watson Wyatt study found that the total value of CEO stock ownership and outstanding equity awards and bonus payouts for CEOs decreased by 42 percent in 2008, which is larger than the 34 percent decline experienced by a typical shareholder at those companies. The stock market recovery this year, however, has mitigated some of the overall loss incurred in 2008. In aggregate, the CEOs analyzed in the study lost a combined $53.7 billion -- roughly $55 million for the average CEO -- in 2008, compared with $3.2 trillion for shareholders of the same set of companies. Watson Wyatt's "2009/2010 Report on Executive Pay: Moving Beyond the Financial Crisis" is based on public data from 982 companies in the S&P Super 1500 that filed proxies before July 2009.

Both CEOs and Shareholders Experienced Reductions in Value With Stock Price Declines

                                               Change in value of CEO
                         Change in company     ownership + outstanding
                           market value         equity + annual bonus
                                      Median                   Median
              Number of Total dollar percentage Total dollar percentage
    Industry  companies value ($M)    change      value ($M)   change

    Consumer     215   -$453,178       -39%       -$24,548      -45%

    Energy/
     Utilities   117   -$726,579       -38%        -$7,903      -50%

    Financials   171   -$505,444       -27%        -$7,596      -36%

    Health Care  107   -$237,607       -26%        -$2,101      -36%

    Materials/
     Industrials 197   -$707,081       -33%        -$4,607      -40%

    Technology   160   -$619,757       -36%        -$6,953      -50%

    All
     Industries  967 -$3,249,647       -34%       -$53,747      -42%

The Watson Wyatt survey also noted that compensation committees continue to structure CEO pay programs so companies with better performance deliver higher realizable pay to their CEOs than low-performing companies. The median CEO at high-performing companies has a three-year aggregate realizable long-term incentive value that is 150 percent larger than at low-performing companies -- $2.3 million versus $0.9 million in 2008.

"As we move into 2010, the role of shareholder activists, forthcoming final SEC regulations and proposed federal legislation will keep the spotlight on executive pay-for-performance. As companies move beyond the financial crisis and start preparing in earnest for economic recovery, they will be challenged to develop incentive programs that continue to attract and retain top talent and motivate and reward superior performance, yet at the same time respond to external pressures," said Steve Van Putten, senior executive compensation consultant at Watson Wyatt.

Other findings from the survey include:

• The value of broad-based employee stock option grants declined by 17 percent in 2008. Realized gains from employee stock option exercises declined by an average 55 percent last year, from $54 million per company to $24 million.

• The estimated in-the-money value of employee stock options outstanding declined by approximately $100 billion for the companies in the study.

To view the 2009/2010 Report on Executive Pay, visit www.watsonwyatt.com/ExecPay.

About Watson Wyatt

Watson Wyatt (NYSE, Nasdaq: WW - News) 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 7,500 associates in 33 countries and is located on the Web at www.watsonwyatt.com.