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NEW YORK (AP) — The typical compensation package for CEOs running companies in the Standard & Poor’s 500 jumped nearly 13% last year, easily outpacing workers’ gains at a time when… Inflation was putting significant pressure on Americans’ budgets.
Average CEO salaries rose to $16.3 million, an increase of 12.6%, according to Reuters. Data analyzed for The Associated Press by Equilar. Meanwhile, wages and benefits for private sector workers rose 4.1% through 2023. At half of the companies in this year’s pay survey, it would take nearly 200 years for a worker in the middle of the company payroll to achieve what their CEO did.
CEOs received a bonus The economy showed remarkable resilienceBasis Strong profits And Boost stock prices. After overcoming the pandemic, companies have faced challenges caused by persistent inflation and rising interest rates. About two dozen CEOs in the AP’s annual survey received pay increases of 50% or more.
“In a post-pandemic market, the desire is for boards to reward and retain CEOs when they feel they have a good leader in place,” said Kelly Malaves, co-founder of Compensation Advisory Partners in New York. “All of this combined leads to increased compensation.”
But Sarah Anderson, who directs the Global Economy Project at the Progressive Institute for Policy Studies, believes the income gap between top executives and workers plays a role in general dissatisfaction among Americans with the economy.
“Most of the focus here is on inflation, which is what people are really feeling, but they feel the pain of inflation more because they don’t see their wages rising enough,” she said.
Many companies have responded to shareholder calls to tie CEO compensation more closely to performance. As a result, a large percentage of pay packages consists of stock awards, which the CEO often cannot cash out for years, if at all, unless the company achieves certain targets, usually a higher stock price, market value, or operating profits. Improved. . The average stock award has increased approximately 11% in the past year compared to a 2.7% increase in bonuses.
the AP CEO compensation study It included pay data for 341 executives at S&P 500 companies who served at least two full consecutive fiscal years at their companies, and which provided proxy data between January 1 and April 30.
Highest earners
FILE – Broadcom CEO Hock Tan speaks as President Donald Trump listens during an event on Nov. 2, 2017 in Washington. Tan topped the AP CEO pay survey with a package worth about $162 million in 2023. (AP Photo/Evan Vucci, File)
Hock Tan, CEO of Broadcom Inc., topped the AP poll with a pay package worth an estimated $162 million.
Broadcom granted Tan stock awards worth $160.5 million on October 31, 2022, for the company’s 2023 fiscal year. Tan was given the opportunity to earn up to 1 million shares starting in fiscal 2025, according to a securities filing, provided Broadcom stock meets certain targets — and remains CEO for five years.
At the time of the award, Broadcom stock was trading at $470. Tan will receive portions of the stock awards if the stock reaches $825 and $950 and the full award if the average closing price is at or above $1,125 for 20 consecutive days between October 2025 and October 2027. The goals seemed ambitious when they were set, but the stock has rallied since Since then, it reached an all-time closing high of $1,436.17 on May 28.
Like rival Nvidia Inc., Broadcom is riding the current AI craze among technology companies. Its chips are used by companies and public bodies ranging from major banks, retailers, telecom operators and government agencies.
In awarding the stock award, Broadcom noted that under Tan, its market capitalization had risen from $3.8 billion in 2009 to $645 billion (as of May 23) and that its total shareholder return during that period easily exceeded that of the S&P 500. It also said Tan will also not receive additional stock awards during the remainder of the five-year period.
Other CEOs topping the AP poll include William Lansing of Fair Isaac Corp., ($66.3 million); Apple’s Tim Cook ($63.2 million); Hamid Moghadam from Prologis Inc. ($50.9 million); and Ted Sarandos, co-CEO of Netflix ($49.8 million).
At Apple, Cook’s compensation represented a 36% decrease from the previous year. Cook requested a pay cut for 2023, in response to a vote at Apple’s 2022 annual meeting, where only 64% of shareholders approved his salary package.
The survey methodology excluded CEOs such as Nikesh Arora at Palo Alto Networks ($151.4 million) and Christopher Winfrey at Charter Communications ($89 million).
Although securities filings show that Elon Musk received no compensation as Tesla CEO, His salary is currently front and center In the electric car company. Musk is asking shareholders to restore a pay package that was invalidated by a Delaware judge, who said the package’s approval process was “deeply flawed.” The compensation, mostly from stock awards worth $2.3 billion when awarded in 2018, is estimated at about $45 billion.
CEO pay versus workers
Workers across the country are receiving higher wages since the pandemic, with wages and benefits for private sector employees rising 4.1% in 2023 after a 5.1% increase in 2022, according to the Labor Department.
Even with these gains, the gap between the person sitting in the corner of the office and everyone else continues to widen. Half of the CEOs in this year’s pay survey earned at least 196 times what the average employee earns. This is up from 185 times in last year’s poll.
The gap is particularly wide in companies where employees typically earn lower wages, such as retailers. At Ross Stores, for example, the company says its employee in the middle of the pay scale was a part-time associate in a retail store and earned $8,618. It would take 2,100 years to earn that much money to equal CEO Barbara Rentler’s compensation as of 2023, which is worth $18.1 million. A year ago, it would have taken the average worker 1,137 years to match CEO pay.
Corporate boards often feel pressured to continue increasing pay for well-performing CEOs for fear they will walk out the door and make more money at a competitor. Melvis said they focus on competitive compensation within their industry or market and not on pay ratio. The better the CEO performs, the more the board is willing to pay.
The disparity between what a CEO earns and what workers earn has not always been so wide.
After World War II and until the 1980s, CEOs at large, publicly traded companies were paid 40 to 50 times the average, said Brandon Reese, deputy director of corporates and capital markets at the AFL-CIO, who runs the Executive Paywatch website. Worker’s wage. Which tracks CEO pay.
“The (current) pay ratio suggests a kind of winner-take-all culture, where companies treat their CEOs, you know, like superstars rather than team players,” Rees said.
Say less about the reward
FILE – Netflix co-CEO Ted Sarandos poses at the premiere of the Netflix film “Good Grief” on Dec. 19, 2023, in Los Angeles. The typical compensation package for CEOs who run companies in the S&P 500 jumped nearly 13% in 2023. (AP Photo/Chris Pizzello, File)
Despite the criticism, shareholders tend to provide overwhelming support for company leaders’ push packages. From 2019 to 2023, companies typically received just under 90% of the votes for their executive compensation plans, according to data from Equilar.
However, shareholders sometimes reject a compensation plan, even though the vote is not binding. In 2023, shareholders in 13 S&P 500 companies subsidized executive pay by less than 50%.
After its investors were very impressed with the pay packages of its top executives, Netflix met with several of its largest shareholders last year to discuss their concerns. It also spoke with major proxy advisory firms, which have influence because they recommend how investors vote at companies’ annual meetings.
Following the talks, Netflix announced several changes to redesign its pay policies. On the one hand, it eliminated the option for executives to allocate their compensation between cash and options. It will no longer give out stock options, which can give executives a payday as long as the stock price remains above a certain level. Instead, the company will give out restricted stock that executives can cash in only after a certain period of time or after certain performance metrics are met.
The changes will take effect in 2024. Last year, co-CEO Ted Sarandos received options worth $28.3 million and a cash bonus of $16.5 million. Co-CEO Greg Peters received options worth $22.7 million and a cash bonus of $13.9 million.
Anderson, of the Institute for Policy Studies, said the pay vote is important because it “highlights some of the most egregious cases of CEO access, and can lead to negotiations over pay and other issues that shareholders may want to raise.” With company leadership.”
“But I think the impact, certainly on the overall size of CEO packages, has not had a significant impact in some cases,” she said.
Female CEOs
More women took the AP poll Compared to previous years, their numbers in corner offices are still small compared to their male counterparts. Of the 341 CEOs listed in Equilar’s data, 25 were women.
Lisa Su, CEO and chairman of chipmaker Advanced Micro Devices, was the highest-paid executive in the AP survey for the fifth straight year in fiscal 2023, taking home $30.3 million in compensation — flat with her compensation package. in 2022. Its overall ranking rose to 21 out of 25.
Among the highest-paid CEOs are Mary Barra of automaker General Motors ($27.8 million); Jane Fraser of banking giant Citigroup ($25.5 million); Cathy Warden of aerospace and defense company Northrop Grumman Corp. ($23.5 million); and Carol Toomey of package delivery company UPS Inc. ($23.4 million).
Median pay for female executives rose 21% to $17.6 million. That’s even better than men: Their average salaries rose 12.2% to $16.3 million.
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Ortutay reported from San Francisco. Journalists Stan Choi and Ken Sweet contributed.
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