For CEOs, $11.7 million a year is just middle of the pack

For CEOs, $11.7 million a year is just middle of the pack

Posted: May. 25, 2018 eight:00 am Updated: May. 25, 2018 6:25 pm

NEW YORK (AP) — Chief executives at the greatest public firms acquired an eight.5 % increase final year, bringing the median pay bundle for CEOs to $11.7 million. Across the S&P 500, compensation for CEOs is typically a whole bunch of instances increased than typical employees.

The pay improve matches the bump that CEOs acquired in 2016, in line with wage, inventory and different compensation knowledge analyzed by Equilar for The Associated Press.

For the first time, the authorities required firms to indicate of their annual proxy statements just how way more bosses make than the typical worker. The typical CEO made 164 instances the median pay of their staff, in line with Equilar’s evaluation.

Because the authorities gave firms broad leeway in how they calculated the median pay of their employees, and since some industries rely closely on part-time employees, the CEO-to-worker pay ratios are imperfect and make comparisons tough. Despite pushback, Congress pressured firms to publish the knowledge as a approach to shine a highlight on earnings inequality.

A debate has already ensued about the significance of this newly launched knowledge.

“High pay ratios send a dispiriting message to the workforce,” stated Liz Shuler, secretary-treasurer of the AFL-CIO, which has been calculating its personal tally of CEO-to-worker pay ratios for years. “Companies are asking their workers to do more with less, at the same that CEO pay is on the rise.”

Detractors amongst enterprise teams, lecturers and compensation consultants say the ratio can provide a misunderstanding. For instance, some firms exclude some of their lower-paid international employees, which rules permit. And firms with massive part-time workforces will present a lot higher disparity between the CEO’s pay and median pay.

At Yum Brands, CEO Greg Creed’s pay of $12.three million was 1,358 instances increased than the firm median of $9,111. The worker who earned that quantity, on an annualized foundation, was a part-time worker at a Taco Bell restaurant.

Even at United Rentals, the place the median pay was $77,127 final year, it could take a employee incomes that quantity 166 years to match the $12.eight million in compensation that CEO Michael Kneeland made final year.

So far, shareholders appear OK with the pay packages for CEOs. At each Yum Brands and United Rentals, greater than 95 % of shareholders authorized their CEOs’ pay for final year. Likely buoying that help was the 31.1 % return for Yum Brands inventory and the 62.eight % rise for United Rentals.

Across the S&P 500, such votes on govt compensation handed with related approval rankings in 2016 and 2017, at 95 %, in line with the knowledge compiled by Equilar. The boards of administrators who set CEO pay, in the meantime, say they’re tying extra of their executives’ compensation to how the firm is performing, and they should pay the going fee to maintain proficient executives.

The AP’s CEO compensation research contains pay knowledge for 339 executives at S&P 500 firms who’ve served at the very least two full consecutive fiscal years at their respective firms, which filed proxy statements between Jan. 1 and April 30. Some firms with extremely paid CEOs didn’t match these standards, corresponding to Oracle, and had been excluded.


The highest-paid CEO in Equilar’s evaluation was Hock Tan of Broadcom, who made $103.2 million. The overwhelming majority of Tan’s compensation got here in the type of a inventory grant, valued at $98.three million. He’ll obtain the shares if the inventory hits sure efficiency targets over the subsequent 4 years. The firm stated in a submitting with regulators that the determine appears substantial, however the quantity Tan earns will “only be exceptional if our (stock returns relative to other companies) is exceptional.”

The second-highest paid CEO was Leslie Moonves of CBS. He made $68.four million, together with a $20 million bonus. CBS inventory fell in 2017, however the firm’s board highlighted how CBS is producing extra premium content material the place it has an possession stake, amongst different accomplishments.

No. three was W. Nicholas Howley at TransDigm, which designs and produces plane parts. He earned $61 million, together with $51.2 million of funds from the firm on inventory choices he holds, as if that they had earned dividends. Howley, a Transdigm co-founder, left his place as CEO final month. He is now govt chairman.

Jeffrey Bewkes of Time Warner was the fourth-highest paid CEO at $49 million. Time Warner rejiggered its compensation formulation for executives following its deal to be acquired by AT&T, which was introduced in 2016 however is nonetheless awaiting authorities approval. Bewkes acquired restricted inventory valued at $32 million.

No. 5 was TripAdvisor’s Stephen Kaufer, at $43.2 million. He acquired grants of choices and restricted inventory valued at $42.1 million, and the firm stated it doesn’t count on to provide him one other inventory grant as long-term incentive compensation till 2021.


This is the first year that firms needed to report the median pay for his or her staff. Median is the midpoint of the pay scale. Across the S&P 500, the median compensation final year was $70,244, in line with Equilar. That’s increased than the common pay for all U.S. employees, at $47,792, as a result of the S&P 500 is full of large, multinational firms. Last year’s median pay for the U.S. is not but obtainable.

Companies in the pharmaceutical, expertise and power sectors had been on the excessive finish of the S&P 500 for employee pay. At Facebook, for instance, the median compensation was $240,430. On the low finish had been retailers and fast-food restaurant chains, which are likely to have extra part-time employees.

Coming into this year, many firms had large issues about the response to their CEO-to-worker pay ratios, significantly amongst their very own staff. But after publishing the numbers, the backlash wasn’t that large, stated Melissa Burek, a accomplice at Compensation Advisory Partners.

“I have clients in the Midwest, where they’re the largest employer in town, and I would have thought those would get more attention,” stated Daniel Laddin, one other accomplice at Compensation Advisory Partners. “But no one seems to be getting too upset about it.”

All the leeway firms had in calculating their ratios helped many to keep away from being an outlier, on both the excessive finish or the low finish, stated Kelly Malafis, additionally a accomplice at Compensation Advisory Partners.

The actual worth in these ratios might come years from now, as traders and employees observe how the ratios change over time, stated Ethan Rouen, an assistant professor at Harvard Business School who research earnings inequality.

It might not make a lot sense to check Yum Brands’ ratio with Facebook’s, however is every firm’s ratio rising or falling by way of the years? In specific, will the figures get higher or worse when the subsequent financial downturn hits, at any time when which may be?

“I think five years down the road,” he stated, “this measure will be more useful than it is right now.”


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