The typical pay package for CEOs at the biggest U.S. companies topped $12.3 million last year, and the gap between the boss and their workforces widened further, according to AP’s annual survey of executive compensation.
Median pay for CEOs in the survey climbed 4.1% last year. For the typical worker at their companies, it rose 3.2%. It would take two lifetimes for the typical employee at most S&P 500 companies to make what their CEO did, or 169 years, according to data analyzed by Equilar for The AP.
For the first time since the AP’s annual pay survey began in 2011, a woman is at the top of the list: Lisa Su of Advanced Micro Devices. She had compensation valued at $58.5 million after guiding her company’s stock to the best performance in the S&P 500 for two straight years.
Otherwise, the top of the pay rankings again includes several familiar names from the media and entertainment industries, such as Walt Disney’s Robert Iger and Netflix’s Reed Hastings.
CEOs such as Alphabet’s Sundar Pichai and Intel’s Robert Swan had packages that were valued even higher that Su’s, but were excluded because the AP’s survey looks only at S&P 500 bosses who have been in the job for at least two years, in part to avoid distortions caused by sign-on bonuses.
Boards of directors could make changes to compensation plans to help shield CEOs from the damage caused by a recession that no one saw coming. Consultants and investors say such adjustments are already being considered in some boardrooms.
Executive pay was already under greater scrutiny among those ultimately in charge of how much CEOs get paid: investors who own the company’s stock and elect the directors to the board.
“I think there has been a growing sense — not by all, but a growing portion of institutional investors — that CEOs are overpaid,” said Amy Borrus, deputy director of the Council of Institutional Investors. “It’s not so much that they’re overpaid but that it’s out of whack with corporate performance”
She said pay packages are often built on goals set by boards that are difficult for investors to understand and that don’t always incentivize performance.
The AP’s compensation study included pay data for 329 CEOs at S&P 500 companies who have served at least two full fiscal years at their companies, which filed proxy statements between Jan. 1 and April 30.
The economy’s deep freeze has caused massive layoffs and furloughs, and nearly 39 million U.S. workers have filed for unemployment benefits in the two months since the outbreak took hold in the country. It’s just one of the ways that companies are preserving cash to survive the sudden recession, along with suspending matches to workers’ 401(k) plans and cutting dividend payouts to shareholders.
To show that they’re sharing in the pain, many top executives have volunteered to give up some or all of their salaries. At Disney, which has furloughed 120,000 of its workers, Iger agreed to forgo all his salary through the end of the fiscal year, except for what he’s contributing to participate in the corporate health benefit plan. He stepped aside as Disney’s CEO earlier this year and became its executive chairman.
Another CEO high atop the rankings, Comcast’s Brian Roberts, pledged to donate all his salary to charities that support COVID-19 relief efforts “for the duration of this situation.”
A CEO’s salary, though, typically makes up less than 10% of total compensation each year. What will hit CEOs’ pocketbooks more is what happens to companies’ share prices, which will affect the value of stock and options they were already granted, as well as the bonuses they would have been in line for.