America's CEOs lose billions in stock options

Warren Buffett lost $15.9 billion in stock options through Oct. 27.

Feeling bad about how much you have been hurt by the stock market plunge? At least you don't have a lot of stock options.

A survey of the paper losses suffered by 175 chief executives of American companies shows that they lost a total of $52.3 billion through Oct. 27, when the stock market hit lows that were tested this week.

To be sure, $15.9 billion, or nearly a third of the total amount, was lost by the richest man in America, Warren E. Buffett, whose stock in Berkshire Hathaway was still worth $45.8 billion.

The survey, by Steven Hall and Partners, a compensation consulting firm, looked at the reported holdings of stock and stock options by chief executives of the Fortune 200 companies - generally the companies with the most sales in the country, both at the end of the company's most recent fiscal year and at the close on Oct. 27. Executives whose companies have been acquired, or who have announced retirement dates, were excluded, leaving 175 bosses.

The bulk of the loss went to a handful of chief executives who were also company founders, and therefore owned a lot of stock. On average, the richest 10 percent of bosses - just 18 people - lost $2.2 billion each. That was only a 33 percent drop, however, leaving them with much smaller losses on a proportional basis than their less-wealthy colleagues.

For executives whose company holdings were largely in stock options, rather than stock, the decline in wealth has been huge. Options allow holders to buy shares at a fixed price, and thereby multiply profits on the way up. But options also multiply losses on the way down. Overall, the options have lost 76 percent of their value.

These losses are far more widespread than in the last bear market, the one that ended in 2002. Then the biggest declines were in a handful of industries. But this year, the losses have hit virtually every company. And of course, they have hit executives down the ranks.

The Hall survey also covered chief financial officers, who have lost 54 percent of their wealth in their companies' securities.

The figures do not show total wealth, of course, because they do not reflect holdings of other securities or of real estate, although it is likely that those holdings have also lost value. Nor do the figures reflect any money the bosses might owe. Those who borrowed against the value of their securities may be hurting much more than the figures indicate.

The members of the poorest group are still well off, and still have high-paying jobs. But at least two of them no longer have securities in their companies worth $1 million, the Hall computations indicate.

Until the last seven or eight years, restricted stock was a relatively rare part of compensation packages. But after the scandals of 2001, options were criticized for giving executives an incentive to take risks, since there was a disproportionate gain to be made from a rapidly rising price. That led to more use of restricted stock, and executives should be grateful for that.

All told, the 175 chief executives had restricted stock worth $2.9 billion and options worth $4.8 billion, at the end of their fiscal years. By Oct. 27, the figures were $1.6 billion and $1.2 billion.

Add the decline of high-paying Wall Street jobs, and this may be a glum holiday season at those retailers who cater to the well-off.