By Elizabeth G. Olson
September 30, 2011

Companies may be dropping some of their more embarrassing perks, but executives are on track to make even more money this year.

The departure of a top executive always ignites a feverish guessing game about exactly how many millions of dollars he or she is walking away with — especially when there is a very public shove out of the executive suite.

Leo Apotheker’s hurried exit from Hewlett-Packard (HPQ) last week led to immediate speculation that he would pocket a tidy pay packet. It was estimated to be worth anywhere from $10 million to a stratospheric $40 million for only 11 months of work. It turned out to be more like $25 million. No one seems to be complaining that there was anything out of the ordinary about his salary, severance pay, signing bonus, relocation package, etc., but that’s still hardly peanuts.

With such a generous exit package in mind, what’s happened to the glare of public disgruntlement amid a tanking economy and all the recent calls to tie CEO compensation to company performance?

Not much, it turns out. Companies are stripping away some of the glorious — but embarrassing or excessive — perks like paying taxes for executives, insurance premiums, financial planning and country club memberships. Status-enhancing corporate jets are still a flashpoint for corporate critics, even as some companies insist they are operational necessities. But even including private jets, the total amount for executive perks is marginal compared to the other sums most executives routinely pocket.

Some curbs on executive perks are underway, according to a new report from compensation firm Equilar. For one thing, reimbursements that make perks tax-free are on the chopping block, according to Aaron Boyd, Equilar’s head of research.

“Both their median value and prevalence has fallen,” he says. More than 7% of companies eliminated them, and the value of such tax reimbursements fell nearly 50% between 2009 and last year, according to the study.

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Stock options also took a hit, Equilar found in another study of the S&P 1500. Slightly fewer companies (3.8%) granted them, but chief executives still grabbed the lion’s share. Meanwhile grants of restricted stock are up, giving chief executives a larger slice of the equity pie — with their percentage more than doubling between 2006 and 2010 to 3.4%.

“Perks across the board are being reduced, but they are not worth a lot,” agrees Doug Friske, global head of compensation for Towers Watson, a risk management and human resources consultancy.

But even though executive compensation may be more tied to company performance — however marginally — Henry Oehmann, director of the national executive compensation practice at tax, audit and advisory firm Grant Thornton, says items like the sign-on bonus and severance payments are typically still awarded to executives.

“Maybe such payments won’t be so hefty,” he adds, “but you don’t want to be the only company that doesn’t have a rich change of control.”

Overall executive salaries this year are not expected to have gigantic bumps, but a recent survey by Pearl Meyer & Partners, a management and corporate compensation firm, found that cash bonus payments this year will be higher than last year — based on success in reaching last year’s goals. Long-term incentive awards and the award of shares will also rise.

This reflects the absence of any significant roadblocks in the way of executive pay, even as shareholders had their first chance earlier this year to publicly approve or disapprove of compensation schemes. Under 2010’s Dodd-Frank Act, stockholders are permitted a non-binding “say-on-pay” vote, but only a sliver of companies lost the vote. About 75% won shareholder approval — with 90% or higher approval, according to figures from compensation trackers.

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Despite this, public votes have companies’ attention. No one likes to be chastised publicly. It’s not good for company optics. Towers Watson says firms are gearing up in advance of next year’s shareholder voting season.

“The companies that received an ‘against recommendation’ or failed to win at least of 80% of the shareholder votes,” says Friske, “will need to step up their efforts if they want to improve their voting results.”

Companies are planning to reach out directly to shareholders, according to a Towers Watson survey of executive compensation professionals at 176 large and mid-size publicly traded companies. An equal amount — about 50% — are going to step up communications with proxy advisors, and 40% planned to hire a firm to solicit proxies.

Some of the mysteries of how executive pay is calculated may become clearer as companies spell out how they tie pay to performance. Little of an executive’s overall compensation is typically salary, and it can be difficult to understand the vague descriptions and murky ins and outs of incentive pay, bonuses, stock appreciation rights, stock grants, and options — and how they all relate to how the company is performing if, in fact, they do.

Companies need to choose clear performance measures and set concrete goals to align pay for performance, recommends Jim Heim, Pearl Meyer’s managing director.

Such transparency may help to dispel charges that too many executives get paid outsized sums simply because the other CEOs in the industry rake in the same amount — or that compensation consultants slap the same template on executive salaries without taking company specifics into account.

Until then, chief executives have yet to feel serious pain — even if some privileges have been tweaked. Compensation experts estimate that average chief executive compensation this year rebounded to pre-recession levels — around $10.2 million. A recent AFL-CIO analysis of 299 S&P 500 companies concluded that last year the average CEO compensation was $11.4 million.

It’s too early to calculate 2011 bonuses. They dropped last year — especially at financial and technology services companies — to an $812,799 median, down from $930,133, according to an Equilar study. But as long as companies can convince their stockholders that their pay and other benefits are justified, chief executives have nothing to fear.

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