You lost your shirt? CEOs did worse!

You think you lost a bundle in the market? The CEOs who lead the companies in the upper decks of the Fortune 500 have fared even worse: Their stock holdings in their own companies declined in value by $54 billion last year.

A just-released study by executive compensation consultancy Steven
Hall & Partners sums up the damage. For CEOs who head 175 of the
top 200 corporations in the Fortune 500, the median value of the equity
held in their own businesses dropped 50% last year. This decline is far
worse than the 37% median drop for the stocks of those companies.

What accounts for the relatively dreadful performance of the CEOs’
own holdings? Options. They tend to be tremendous wealth accumulators
in good times. But when a stock price falls below an option’s exercise
price, the intrinsic value of the option goes to zero. And in this
sinking stock market, that has happened a lot. Those underwater options
create a more dramatic drop-off in CEO equity values than you’d expect
from just looking at a company’s stock price.

So that whopping $54 billion, actually, is the total amount that the
CEOs’ equity value–including shares owned outright, exercisable and
unexercisable option gains, and unvested restricted and performance
shares–dropped in 2008. As for the decline in the median value of those
CEOs’ holdings, it went from $60.9 million to $29.5 million.

Steve Hall, managing director of Steven Hall & Partners, notes
that equity compensation has long been viewed as the most direct
approach to link executives’ interests with their shareholders’–and,

more...http://postcards.blogs.fortune.cnn.com/2009/01/22/you-lost-your-shirt-ceos-did-worse/