After ballooning for years, CEO pay development is lastly slowing.
The typical compensation bundle for chief executives who run S&P 500 firms rose simply 0.9% final 12 months, to a median of $14.8 million, in response to information analyzed for The Associated Press by Equilar. That means half the CEOs within the survey made extra and half made much less. It was the smallest improve since 2015.
Still, that’s unlikely to quell mounting criticism that CEO pay has turn into excessively excessive and the imbalance between firm bosses and rank-and-file staff too extensive. Discontent over that hole has helped gasoline labor unrest, and even some institutional traders have pushed again towards a number of of probably the most eye-popping packages.
The smaller improve got here after CEO pay soared 17% in 2021, when boards rewarded high executives handsomely for steering their firms by way of the pandemic-induced recession.
Many of the compensation packages had been authorised early in 2022 however even a small increase might sound lavish looking back towards the backdrop of a 12 months by which inventory markets tanked to their worst efficiency since 2008, inflation erased wage positive aspects, fears of a recession grew, and tech giants started shedding staff.
“I’m not surprised that after two record years in a row, pay hikes cooled somewhat,” stated Sarah Anderson, who directs the Global Economy Project on the progressive Institute for Policy Studies. “What we shouldn’t lose sight of is that CEO pay is still off the charts by historical measures.” She stated even a small hike final 12 months was “outrageous.”
In distinction to latest years, CEO pay positive aspects had been decrease than the 5.1% improve in wages and advantages netted by private-sector staff by way of 2022.
Still, employee pay didn’t sustain with inflation, which was sitting at 6.4% on the finish of final 12 months. And the pay disparity between CEOs and rank-and-file staff, which has been widening for years, narrowed solely barely.
The median pay for staff at firms included within the AP survey was $77,178, up 1.3% from $76,160 the earlier 12 months. That means it could take that employee 186 years to make what a CEO making the median pay earned simply final 12 months. At the identical group of firms in 2021, it could have taken 190 years.
The timing of among the largest pay packages struck a discordant notice towards the backdrop of inauspicious instances for his or her industries.
Alphabet’s CEO, Sundar Pichai, ranked No. 1 within the AP’s pay survey this 12 months with a bundle valued at almost $226 million. The overwhelming majority of his compensation got here from a grant of restricted inventory, valued at $218 million, and which Google grants its CEO each three years.
The chief of Google received’t reap many of the advantages of the shares awards immediately and the way a lot he realizes finally is dependent upon how Alphabet’s inventory performs. Alphabet famous in its annual proxy submitting that, in contrast with Pichai’s 2019 inventory awards, a larger proportion of the newest batch will solely vest if the corporate reaches objectives for shareholder return.
Even so, Pichai obtained a complete compensation bundle 15 instances larger than this 12 months’s median CEO pay simply earlier than Google laid off tens of hundreds of staff. The firm’s whole shareholder returns fell 39% final 12 months.
Stephen McMurtry, a Google software program engineer and member of the Alphabet Workers Union-CWA, stated he was not impressed when Pichai advised staff shortly after the layoffs that executives would take vital bonus cuts in 2023 as a result of “bonuses are a small part of executives’ primarily stock-based compensation.” Pichai didn’t obtain a bonus in 2022.
“The clear disparity between executive rewards and our jobless former coworkers erodes trust and further underscores the need for transparency,” McMurtry stated in a press release e-mailed to AP.
Like many firms, Alphabet’s fairness portion of government compensation is designed to replicate outcomes over a number of years. Since Pichai began as CEO in 2015, Alphabet’s inventory has almost quadrupled, and the corporate has turn into the third most useful on Wall Street.
Alphabet declined to remark past its proxy assertion.
Nearly 130 CEOs within the AP’s survey noticed pay cuts final 12 months. Among them was UPS CEO Carol Tomé, who obtained a complete compensation bundle valued at almost $19 million, most of it in inventory awards. That’s down 31% from $27.6 million in 2021. UPS stated Tome’s compensation was decrease as a result of she didn’t exceed efficiency targets by as a lot in 2022 as she did in 2021.
Tomé is attempting to stave off a probably crippling strike by unionized staff, who really feel they noticed little of the corporate’s windfall in earnings, which almost tripled throughout the pandemic as shopper reliance on deliveries grew.
“I don’t feel bad for her that she got a decrease,” stated Jimi Hadley, UPS bundle driver in Roswell, Georgia, and Teamsters store steward. “Nineteen million? Most workers will never make that in their entire life.”
Tomé’s pay was 364 instances larger than $52,144 median pay for UPS staff, though the corporate notes that the typical pay for full-time drivers is $95,000. UPS says its government pay is “at the midpoint when compared to other companies of similar size and global scale.”
Some boards put the brakes on CEO compensation following pushback from institutional traders, who get the prospect to vote in “Say On Pay” tallies at annual shareholder conferences, though such votes are solely advisory and don’t compel boards to make adjustments.
Homebuilder Lennar, for instance, capped the annual money bonuses for its co-CEOs, Rick Beckwitt and Jonathan Jaffe, at $6 million every in response to complaints from traders about their $16.6 million bonuses in 2021. Just 63% of Lennar’s traders voted to approve the pay packages eventually 12 months’s shareholder assembly, in comparison with 84% in 2021.
Beckwitt and Jaffe noticed their whole compensation fall 11% and 12% in 2022, respectively, to $30.4 million and $30 million.
Higher up the pay scale, Apple CEO Tim Cook was no. 3 within the AP survey with a compensation bundle valued at $99.4 million, almost equivalent to what Apple gave him in 2021. But Cook has requested a 40% pay lower for 2023, in response to the vote eventually 12 months’s annual assembly, the place simply 64% of shareholders authorised of Cook’s pay bundle, in comparison with 94% the earlier 12 months.
Such shareholder pushback stays uncommon, nonetheless. The overwhelming majority of firms included in AP’s survey obtained greater than 90% help for his or her government compensation packages in 2022.
The AP’s and Equilar’s compensation examine included pay information for 343 CEOs at S&P 500 firms who’ve served a minimum of two fiscal years at their firms, which filed proxy statements between Jan. 1 and April 30. Some well-paid CEOs are usually not included as a result of they don’t match the standards, comparable to Amazon’s Andy Jassy and Microsoft’s Satya Nadella.
The largest cuts to CEO pay final 12 months had been in annual performance-based money awards, which had been down 15.5% to a median of $2.3 million. On the opposite hand, inventory awards rose 10.5% to a median of $8.5 million.
Cash salaries and bonuses comprised lower than 1 / 4 of compensation for the everyday CEO within the survey. The bulk comes from inventory and inventory choices as a result of shareholders have advocated for CEO pay to intently aligned with their very own returns.
Executives will doubtless see steeper pay cuts in 2023 when boards think about the total impact of the inventory market’s downturn, stated Kelly Malafis, a accomplice at Compensation Advisory Partners, a consulting agency that works with boards.
“We’re not seeing companies slash and burn,” Malafis stated. “We might see some of that next year.”
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AP Business Writers Alex Veiga in Los Angeles, Matt Ott in Silver Spring, Maryland, and Michael Liedtke in Washington, D.C., contributed to this story.
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