CEO Compensation is Down

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NO, IT’S UP – YOU BETTER JUDGE FOR YOURSELF        

ArtBy Arthur Chalekian GEPC

[Financial Consultant]

The New York Times reported the 200 most-highly-paid CEOs in the United States collectively experienced a pay cut last year!

CEOs’ average compensation – all CEOs compensation added together and then divided by 200 – fell by 15 percent from 2014 to 2015.

Of course, you know what they say about lies and statistics

Equilar, the company responsible for the study, reported CEO pay grew modestly in 2015. They looked at median CEO pay – the number in the middle. It was $16.6 million for fiscal 2015. That’s up 5 percent from the previous year.

No matter how you interpret the results, not one CEO earned more than $100 million. CEOs in the technology industry had the highest median pay while those in basic materials (which includes oil and gas companies) had the lowest, according to Equilar.

Many people have argued company performance should inform CEO pay, but there wasn’t much evidence this was the case. Although there may have been a basis for CEO pay changes, there was no clear correlation to shareholder returns or company revenues.

For instance:

  • A 702 percent increase in pay was awarded when total shareholder return was down 5 percent, and company revenues were down 1 percent.
  • A 286 percent increase in pay was awarded when total shareholder return was up 16 percent, and company revenues were up 9 percent.
  • A 48 percent reduction in pay occurred when total shareholder return was up 25 percent, and company revenues were up 4 percent.

Assessment

The portion of 2015 corporate budgets allotted to pay hikes for employees increased by 2.8 percent, on average, according to Mercer. The report said, “… the highest-performing employees received average base pay increases of 4.8 percent in 2015 compared to 2.7 percent for average performers and 0.2 percent for the lowest performers …”

Conclusion

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One Response

  1. Pity the CEOs – NOT!
    Bonita

    Like

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