Summary List Placement
Increases in earned CEO pay fell from 2018 to 2019, according to a new report by consulting firm Willis Towers Watson, with median earned compensation for CEOs increasing 5.5% in 2019 compared with an increase of 13.7% in 2018. This reflects the smallest increase for CEO earned pay since 2016, according to Willis Towers Watson. Earned pay includes salary, short and long-term incentives earned and the value of vested and exercised awards.
The report comes as many CEOs this year cut portions of their own pay to help with unexpected coronavirus costs.
Though the rate of earned pay growth fell among the broadest group of CEOs analyzed in the study, some indexes’ executives saw bigger gains than others. When examining CEOs within their respective S&P indexes (S&P 1500, S&P 500, S&P 400 and S&P 600), the increases vary.
The chart below splits out earned pay increases in 2018 and 2019 for CEOs of companies in various S&P company lists. The only group where pay increases grew year over year was among S&P 500 CEOs — generally the largest companies by market cap in the study — who saw an 11.6% increase in 2018 and 13.1% growth in 2019.
To get a couple examples of how those numbers work, let’s look at some CEOs’ total compensation increases in the past few years. Note that total compensation is different from the earned pay being analyzed in the Willis Towers Watson study — total compensation typically includes grant-date fair value for equity awards and is more straightforward to illustrate.
When equity awards to executives are granted and factored into reported total compensation, their value is calculated for reporting purposes using the company’s stock price on that day. However, some equity awards are exercised on a later date or vest on later dates, so what the executive actually receives doesn’t actually end up being the price initially reported in the company’s proxy statement filings. The actual monetary value that an executive ends up with is called the realized value.
However, looking at how total compensation changes from year to year can help illustrate the type of changes shown in the above chart. From 2017 to 2018, Target CEO Brian Cornell’s total compensation increased by 105%, from $8.4 million to $17.2 million.
The growth can be attributed to Target “[shifting] the timing of annual equity grants so that grants occur in March of each year, instead of the previous practice of granting equity to executive officers in January, which is the last month of [Target’s] fiscal year. Due to that timing shift, there were no stock awards granted in fiscal 2017,” according to the proxy.
But from 2018 to 2019, Cornell’s total compensation only increased by 10%, from $17.2 million to $18.9 million. Similarly, CVS Health CEO Larry Merlo’s total compensation increased 79% from 2017 to 2018 from $12.3 million to $21.9 million and 66% to $36.5 million from 2018 to 2019.
But some CEOs saw big gains in year-over-year increases. Kroger CEO Rodney McMullen’s increase …read more
Source:: Business Insider