The rewards of being a CEO

The typical pay package for CEOs at the biggest U.S. companies topped $12.3 million last year, and the gap between the boss and their workforces widened further,

Median pay for CEOs in the survey climbed 4.1% last year. For the typical worker at their companies, it rose 3.2%. It would take two lifetimes for the typical employee at most S&P 500 companies to make what their CEO did, or 169 years, according to data.

CEOs in the AP’s survey had a median compensation valued at $12.3 million last year, which means half made more and half made less. Besides salary and cash bonuses, that includes stock awards and option grants that CEOs will get the full value of only if the company’s stock price rises in the future. In many cases, big chunks of the compensation were for stock and options that companies granted their CEOs in 2019 for their performance in 2018 and earlier years. 


For the first time since the AP’s annual pay survey began in 2011, a woman is at the top of the list: Lisa Su of Advanced Micro Devices. She had compensation valued at $58.5 million. CEOs such as Alphabet’s Sundar Pichai and Intel’s Robert Swan had packages that were valued even higher that Su’s, but were excluded because the AP’s survey looks only at S&P 500 bosses who have been in the job for at least two years, in part to avoid distortions caused by sign-on bonuses. (The AP’s compensation study included pay data for 329 CEOs at S&P 500 companies who have served at least two full fiscal years at their companies, which filed proxy statements between Jan. 1 and April 30.)

The 4.1% rise in median pay was a slowdown for S&P 500 CEOs, who had seen their pay jump 7.2% the year before and by even more in earlier years. Much of the slowdown was because of a drop in how much cash the CEOs got for hitting various performance targets.  At Eastman Chemical, for example, the value of CEO Mark Costa’s compensation dropped 11% to $14 million last year, according to the survey, in part because he fell short in some performance metrics set by the board of directors. Eastman’s board said Costa exceeded the goals set for “growth and innovation” in 2019, but he only partially met the targets for how much cash the company generated, as well as for employee safety and other measures. He received $377,000 in what the company calls its “unit performance plan,” down from the $1.5 million he got from the plan a year earlier. 

A CEO’s salary, though, typically makes up less than 10% of total compensation each year. What will hit CEOs’ pocketbooks more is what happens to companies’ share prices, which will affect the value of stock and options they were already granted, as well as the bonuses they would have been in line for. 

”The risk is that if there is a strong rebound in the market, that could lead to windfall profits for executives,” said Borrus of the Council of Institutional Investors, which represents pension funds and other big investors. 

https://apnews.com/13827540beb28669fa7847de43b52ac4