NEW YORK – Although regular workers have won their biggest increase in decades, they seem small compared to what CEOs are getting.
The average compensation package for chief executives who run S&P 500 companies rose 17.1% last year, to a median of $ 14.5 million, according to data analyzed for Equilar’s The Associated Press.
The gain rises to a 4.4% increase in wages and benefits earned by private sector workers until 2021, the fastest on record in 2001. The increase also failed for many rank-and-file workers to keep pace with inflation. , which reached 7% at the end of last year.
CEO wages have risen sharply as stock prices and earnings as the economy roars from its brief recession in 2020. Since most of a CEO’s compensation is tied to such performance, their pay packages have plummeted. after years of mostly moderate growth.
In many of the most attractive packages, such as Expedia Group, valued at $ 296.2 million and JPMorgan Chase’s $ 84.4 million, the boards have given particularly large grants of stock or stock options to recently appointed CEOs who have Navigate to their companies during a pandemic or to established leaders they want to convince to hang out.
CEOs are often unable to cash in on such stocks or options for many years, or possibly ever, unless the company meets performance targets. But companies must still disclose estimates of how much they cost. Only about a quarter of the standard pay package for all S&P 500 CEOs last year came as actual cash they could pocket.
Regardless of its composition, the salary gap between CEOs and the rank-and-file workers they oversee continues to widen. In half of the companies in this year’s salary survey, a worker in the middle of the company’s salary scale will need at least 186 years to do what their CEO did last year. That rose from 166 last year.
At Walmart, for example, the company said its median associate made $ 25,335 in compensation last year. That means half of its workers made more, and half made less.
That’s up 21% from $ 20,942 last year and comes as the company’s average hourly U.S. wage rose from $ 15.25 in March 2021 to more than $ 17 today. That increase is larger than CEO Doug McMillon’s increase, on a percentage basis. But his 13.7% increase gave him a total package worth $ 25.7 million.
Anger grows in such an imbalance. Surveys suggest that Americans in political parties see CEO salaries as too high, and some investors are pushing back.
Workers were trying to organize unions across the country, and the “Great Resignation” encouraged millions to quit to find better jobs elsewhere. The U.S. government counted more than 4 million quits in April 2021 alone, the first time that has happened. The monthly number topped 4.5 million twice.
“That would add a huge cost to the corporate bottom lines, to have this kind of turnover rates,” said Sarah Anderson, director of the global economics project at the progressive Institute for Policy Studies.
“They have to think about what kind of message they’re sending to those people, about whether they really value their jobs,” Anderson said. “When the person in the corner office earns a few hundred if not thousands of times more, that sends a really lowering moral message.”
Revenues for CEO salaries have slowed in recent years, with the median increase dropping from 8.5% in 2017 to 4.1% in 2019. It rose to 5% in 2020, which was a complex year as the pandemic closed the economy and the profits of many companies are stamped.
For 2020, many companies are rejigging the intricate formula they have created to determine the salary of their CEOs. The repairs consisted of losses caused by the pandemic, something many boards said was an extraordinary event outside the CEO’s control.
Then came 2021. Thanks to the reopened economy, very low interest rates from the Federal Reserve and other factors, stock prices rose and the S&P 500 jumped nearly 27%, setting records. throughout the year. Revenues per share increased by approximately 50%.
Throughout the year, CEOs have had to navigate snarled supply chains and shortages of chips and other vital materials that have affected businesses in the industries, said Dan Laddin, a partner at Compensation Advisory Partners, a consulting firm. firm working on boards.
“It all leads to a desire to really reward” executives, said Kelly Malafis, also a partner at Compensation Advisory Partners, “because financial performance is there, and the perspective is that management teams are unique in navigating the situation and delivering results. ”
Last year’s 17.1% jump for the median salary of S&P 500 CEOs was the largest since a 23.9% surge for 2010 compensation packages, according to data analyzed by Equilar.
Consider Marry Barra, CEO of General Motors. His industry was particularly affected by the shortage of computer chips, which was disrupting vehicle production.
However, GM’s board stressed how the company still delivers record earnings before interest, taxes and several other items. The automaker has also accelerated the development of its electric vehicles. Those are two of the factors influencing Barra’s salary, and his compensation rose 25.4% to $ 29.1 million.
“I expect the corporation that makes revenue records to recognize that the workers who do the work are the ones who make the profit,” said Dave Green, a hot metal driver at a GM facility in Bedford, Indiana. “We’re just trying to get through.”
He mentioned in particular temporary workers who earn about $ 16 per hour, who have to work for many years before entering as full-time employees and don’t get many opportunities for days off in the interim.
“New people coming in, their kids aren’t going to have the opportunities that my kids have,” said Green, who has two daughters and started at GM as a summer helper in 1989.
Closer to the top of the rankings for CEO compensation last year was Jamie Dimon of JPMorgan Chase, whose compensation package worth $ 84.4 million was the fifth highest in the AP survey. That’s up 166.7% since last year, and most of it came from an award of stock options worth $ 52.6 million.
The board said it provided options because of its desire that Dimon, who is 66 years old, continue to lead the company for more years and a “unique inflection point in Mr. Dimon’s tenure.” It also said the options were not part of his regular annual payment and he had to wait at least five years to start exercising them.
However, only 31% of investors at JPMorgan Chase’s annual shareholders ’meeting recently gave a thumbs up to Dimon’s pay package. The vote is advice only, however, and does not force the company to make changes.
Last year, a median of 92.6% of shareholders approved the so-called “Say On Pay” vote in the AP survey. That’s down only slightly from 93.4% last year.
The AP and Equilar compensation study includes salary data for 340 CEOs at S&P 500 companies who have served at least two financial years at their companies, which filed proxy statements between Jan. 1 and April 30. Some high-profile CEOs were excluded because they did not fit the standards, such as Amazon’s Andy Jassy and Twitter’s Parag Agrawal. The survey does not count changes in the amount of CEOs ’pension benefits and some other items in its entirety for compensation.
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