CEO pay rose 17% as profits, stocks soar; lagging workers


Even if the average worker gets the biggest pay rise in decades, they still look tiny compared to what CEOs are getting.

The typical compensation package for executives who run S&P 500 companies rose 17.1% last year to an average of $14.5 million, according to data analyzed for the Associated Press by the Associated Press. Equilar.

This increase surpasses the 4.4% increase in wages and benefits received by private sector workers through 2021, the fastest increase on record since 2001. Wage growth for Many qualified workers have also failed to keep up with inflation, which hit 7% at the end of last year.

CEO pay rises as stock prices and profits rebound sharply as the economy emerges from a short recession in 2020. Because much of a CEO’s compensation is tied to such performance, its pay packages they have skyrocketed after years of mostly moderate growth.

In many of the most notable packages, such as Expedia Group, valued at US$296.2 million, and JPMorgan Chase at US$84.4 million, the board has provided exceptionally large stock or options funding. stocks for recently appointed CEOs navigating their companies through the pandemic or to establish leaders they want to convince to go around.

CEOs often cannot make money from such a stock or option for many years, or possibly ever, unless the company achieves its operational goals. But companies still have to disclose estimates of their value. Only about a quarter of the typical pay package for all S&P 500 CEOs last year was actual cash they could pocket.

Whatever its composition, the pay gap between CEOs and the ranks of the employees they oversee is widening. At half of the companies in this year’s salary survey, workers in the middle of the company’s pay scale will take at least 186 years to do what their CEO did last year. This is up from 166 a year earlier.

At Walmart, for example, the company said its average affiliate paid $25,335 last year. That means half of their workers earn more and half make less.

This is up 21% from $20,942 a year earlier and comes as the company’s average US hourly wage rises from $15.25 in March 2021 to more than $17. present. That increase is larger than the increase received by CEO Doug McMillon, as a percentage. But his 13.7% gain gave him a total package of $25.7 million.

Anger is growing over such an imbalance. Surveys show that Americans across political parties find CEO salaries too high and some investors are pushing back.

Workers are trying to organize unions across the country, and “The Great Resignation” has encouraged millions to quit their jobs to find better jobs elsewhere. The US government counted more than 4 million people leaving their jobs in April 2021 alone, the first time that has happened. The monthly figure has since grown to 4.5 million twice.

“That would add a huge cost to corporate profits, to get such a rate of revenue,” said Sarah Anderson, project director for global economics at the Institute for Policy Studies.

“They should think about the kind of message they’re sending to those people, about whether they’re really appreciated for their work,” says Anderson. “When the guy in the corner office is making a few hundred if not a thousand times that’s sending a really demoralizing message.”

CEO pay growth has slowed in recent years, with the average increase falling from 8.5% in 2017 to 4.1% in 2019. It has increased to 5% in 2020, which is one The year was complicated as the pandemic shut down the economy and profits at many companies plummeted.

In 2020, many companies have tweaked the complex formulas they create to determine the salaries of their CEOs. The adjustments have offset the losses caused by the pandemic, which many councils consider to be an unusual event beyond the CEO’s control.

Then into 2021. Thanks to the reopening of the economy, super-low interest rates from the Federal Reserve, and other factors, stock prices have skyrocketed and the S&P 500 is up nearly 27%, setting a record for the year. . Earnings per share skyrocketed to about 50%.

Throughout the year, CEOs have had to navigate difficult supply chains and chip shortages, said Dan Laddin, a partner at Compensation Advisory Partners, a consulting firm that works with boards. other important materials affecting the business activities of the industries.

Kelly Malafis, also a partner at Compensation Consulting Partners, said: “All of this leads to a desire to really reward executives, because financial performance is there, and important. point that management teams are exceptional at navigating situations and delivering results. “

According to data analyzed by Equilar, last year’s 17.1% jump in the median salary of S&P 500 CEOs was the largest since a 23.9 percent increase in compensation packages in 2010, according to data compiled by Equilar. The data is analyzed by Equilar.

Consider Mary Barra, CEO of General Motors. Her industry has been particularly hard hit by shortages of computer chips, which have plagued car production.

Even so, GM’s board highlighted how the company still delivered record profits before interest, taxes and a few other things. The automaker is also stepping up the development of its electric vehicles. Those were two of the factors that affected Barra’s pay, and her compensation increased 25.4 percent to $29.1 million.

“I hope the record-profit company realizes that the workers doing the work are the creators,” said Dave Green, a hot metal driver at a GM facility in Bedford, Indiana. turnover. “We’re just trying to get through.”

He specifically cites temporary workers who earn around US$16 per hour, who have to work for years before becoming full-time employees and do not have many opportunities for vacations during their time off. there.

“Newcomers, their kids won’t get the chance my kids got,” said Green, who has two daughters and started at GM in the summer of 1989.

Closest in last year’s CEO pay rankings was Jamie Dimon of JPMorgan Chase, whose compensation package was worth $84.4 million, the fifth highest in the AP survey. That’s up 166.7% from a year earlier and comes largely from the $52.6 million stock options award.

The board said it provided the options because it wanted Dimon, 66, to continue to lead the company for many more years and be a “unique inflection point in Mr. Dimon’s tenure.” It also said the options were not part of his usual annual compensation and that he had to wait at least 5 years to start exercising them.

Even so, only 31% of investors at JPMorgan Chase’s recent annual shareholder meeting agreed to Dimon’s pay package. However, the vote is advisory only and does not force the company to make changes.

Last year, an average of 92.6% of shareholders approved their so-called “Say On Pay” votes in the AP survey. This is only slightly down from 93.4% the previous year.

The AP and Equilar Compensation Study, which includes salary data for 340 CEOs at S&P 500 companies who have served at least two fiscal years at their companies, filed proxy statements as of Jan. January to April 30. Several well-known CEOs were not included because they didn’t fit the criteria, such as Amazon’s Andy Jassy and Twitter’s Parag Agrawal. The survey did not include changes in the value of CEO’s pension benefits and some other amounts in total compensation.

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