NEW YORK (AP) — They’re the $10 million men and women.
Propelled
by a soaring stock market, the median pay package for a CEO rose above
eight figures for the first time last year. The head of a Standard &
Poor’s 500 company earned a record $10.5 million, an increase of 8.8
percent from $9.6 million in 2012, according to an Associated
Press/Equilar pay study.
Last year was the fourth straight that
CEO compensation rose following a decline during the Great Recession.
The median CEO pay package climbed more than 50 percent over that
stretch.
A chief executive now makes about 257 times the average
worker’s salary, up sharply from 181 times in 2009.
The best paid
CEO last year led an oilfield-services company. The highest paid female
CEO was Carol Meyrowitz of discount retail giant TJX, owner of TJ Maxx
and Marshall’s. And the head of Monster Beverage got a monster of a
raise.
Over the last several years, companies’ boards of directors
have tweaked executive compensation to answer critics’ calls for CEO
pay to be more attuned to performance. They’ve cut back on stock options
and cash bonuses, which were criticized for rewarding executives even
when a company did poorly. Boards of directors have placed more emphasis
on paying CEOs in stock instead of cash and stock options.
The
change became a boon for CEOs last year because of a surge in stocks
that drove the S&P 500 index up 30 percent. The stock component of
pay packages rose 17 percent to $4.5 million.
"Companies have been
happy with their CEOs’ performance and the stock market has provided a
big boost," says Gary Hewitt, director of research at GMI Ratings, a
corporate governance research firm. "But we are still dealing with a
situation where CEO compensation has spun out of control and CEOs are
being paid extraordinary levels for their work."
The highest paid
CEO was Anthony Petrello of oilfield-services company Nabors Industries,
who made $68.3 million in 2013. Petrello’s pay ballooned as a result of
a $60 million lump sum that the company paid him to buy out his old
contract.
Nabors Industries did not respond to calls from The Associated Press seeking comment.
Petrello
was one of a handful of chief executives who received a one-time boost
in pay because boards of directors decided to re-negotiate CEO contracts
under pressure from shareholders. Freeport-McMoRan Copper & Gold
CEO Richard Adkerson also received a one-time payment of $36.7 million
to renegotiate his contract. His total pay, $55.3 million, made him the
third-highest paid CEO last year.
The second-highest paid CEO
among companies in the S&P 500 was Leslie Moonves of CBS. Moonves’
total compensation rose 9 percent to $65.6 million in 2013, a year when
the company’s stock rose nearly 70 percent.
"CBS’s share
appreciation was not only the highest among major media companies, it
was near the top of the entire S&P 500," CBS said in a statement.
"Mr. Moonves’ compensation is reflective of his continued strong
leadership."
Media industry CEOs were, once again, paid
handsomely. Viacom’s Philippe Dauman made $37.2 million while Walt
Disney’s Robert Iger made $34.3 million. Time Warner CEO Jeffrey Bewkes
earned $32.5 million.
The industry with the biggest pay bump was
banking. The median pay of a Wall Street CEO rose by 22 percent last
year, on top of a 22 percent increase the year before. BlackRock chief
Larry Fink made the most, $22.9 million. Kenneth Chenault of American
Express ranked second with earnings of $21.7 million.
Like stock
compensation, performance cash bonuses jumped last year as a result of
the surging stock market and higher corporate profits. Earnings per
share of the S&P 500 rose 5.3 percent in 2013, according to FactSet.
That resulted in a median cash bonus of $1.9 million, a jump of 12.6
percent from the prior year.
More than two-thirds of CEOs at
S&P 500 companies received a raise last year, according to the
AP/Equilar study, because of the bigger profits and higher stock prices.
CEO
pay remains a divisive issue in the U.S. Large investors and boards of
directors argue that they need to offer big pay packages to attract
talented men and women who can run multibillion-dollar businesses.
"If
you have a good CEO at a company, the wealth he might generate for
shareholders could be in the billions," says Dan Mitchell, a senior
fellow at the Cato Institute, a libertarian think tank. "It might be
worth paying these guys millions for doing this type of work."
CEOs are still getting much bigger raises than the average U.S. worker.
The
8.8 percent increase in total pay that CEOs got last year dwarfed the
average raise U.S. workers received. The Bureau of Labor Statistics said
average weekly wages for U.S. workers rose 1.3 percent in 2013. At that
rate an employee would have to work 257 years to make what a typical
S&P 500 CEO makes in a year.
"There’s this unbalanced
approach, where there’s all this energy put into how to reward
executives, but little energy being put into ensuring the rest of the
workforce is engaged, productive and paid appropriately," says Richard
Clayton, research director at Change to Win Investment Group, which
works with labor union-affiliated pension funds.
Investors have
become increasingly vocal about executive pay since the recession. This
has led to an increasing number of public spats between boards of
directors, who propose pay packages, and shareholders, who own the
company. These fights become public during "say on pay" votes, when
shareholders have an opportunity to show they approve or don’t approve
of pay packages. Votes are non-binding, but companies sometimes act when
there is clear disapproval from shareholders.
Petrello was the
best-paid CEO largely because the board of directors of Nabors
Industries’ wanted to end his previous contract. Under that contract,
Petrello could have been owed huge cash bonuses, and the company could
have paid out tens of millions of dollars if he were to die or become
disabled. The board changed his contract following "say on pay" votes in
2012 and 2013 that showed shareholders were unhappy with how Nabors
paid its executives.
There have been other signs of shareholder
concern about CEO pay. This month, 75 percent of Chipotle Mexican Grill
shareholders voted against a proposed pay package for co-CEOs Steve Ells
and Montgomery Moran. Ells earned $25.1 million in 2013 while Moran
earned $24.3 million, a 27 percent rise in compensation for each.
Chipotle spent $49.5 million on CEO pay last year, the fourth highest in
the S&P 500.
"Companies are now taking the time to think
through their pay practices and are talking more with shareholders,"
says Hewitt of GMI Ratings. "There’s still a long way to go but pay
practices are getting better."
To calculate a CEO’s pay package,
the AP and Equilar looked at salary as well as perks, bonuses and stock
and option awards, using the regulatory filings that companies file each
year. Equilar looked at data from 337 companies that had filed their
proxies by April 30. It includes CEOs who have been at the company for
two years.
One prominent name not included in the data was Oracle
CEO Larry Ellison, who is typically one of the best paid CEOs in the
country.
Oracle files its salary paperwork later in the year, so
Ellison was excluded in the 2013 survey data. He was awarded $76.9
million in stock options for Oracle’s fiscal year ending May 2013,
according to proxy filings.
Among other findings:
— Female
CEOs had a median pay package worth more than their male counterparts,
$11.7 million versus $10.5 million for males. However, there were only
12 female CEOs in the AP/Equilar study compared with 325 male CEOs that
were polled.
TJX’s Meyrowitz was the best-paid female CEO in the
AP/Equilar study. She earned $20.7 million last year.
— The CEO
who got the biggest bump in compensation from 2012 to 2013 was Rodney
Sacks, the CEO of Monster Beverage. Sacks earned $6.22 million last
year, an increase of 679 percent. Monster’s board of directors awarded
Sacks $5.3 million in stock options to supplement his $550,000 salary
and $300,000 cash bonus.
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Follow Ken Sweet on Twitter @kensweet
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