PHILADELPHIA--(BUSINESS WIRE)--Top U.S. companies reduced compensation levels in a year of remarkable turbulence for executive pay, according to results from The Wall Street Journal/Hay Group 2008 CEO Compensation Study released today. The Wall Street Journal partnered with Hay Group for the second year on its annual study, which examines how large companies were compensated across all forms of pay in fiscal 2008. For the first time since 2001, CEO compensation levels showed declines in 2008, with overall cash compensation decreasing 8.5%. Driving this change was a double-digit drop in annual incentives, which fell by 10.9%. Not surprisingly, the sharpest declines in CEO compensation levels were seen in financial services companies, where total cash compensation decreased 43.1%. These declines tracked overall company performance as the median company declined 5.8% and the median financial services company declined 38.2% in net income from 2007.

"During a year when companies lost significant shareholder value, CEO pay followed suit," said Irv Becker, National Practice Leader of Hay Group's U.S. Executive Compensation Practice. "However, the changes we've seen to the executive compensation landscape in 2008 will likely pale in comparison to what's to come. Shareholder, governmental and public pressure will continue to shape the way compensation committees evaluate executive pay."

For the second year in a row, performance-based plans outpaced stock options as the most prevalent long-term incentive (LTI) compensation among large company CEOs - an outcome that had never occurred before 2007. While 2007 marked something of a milestone in executive pay, 2008 further established performance-based plans as the top vehicle to compensate CEOs for long-term performance, with 73% of companies using them.

"Seeing performance plans displace stock options would have been unimaginable only five years ago," noted Becker. "Their rise is a sign that boards are being more responsive to shareholder concerns about paying for long-term company performance."

(Read the entire release on BusinessWire.)