CEO salaries at highest level since 2007
Hiring was up in April, but so were unemployment numbers. However, one thing that hasn’t changed is the stagnant salary level of average U.S. workers. According to the Associated Press, however, CEO salaries in 2010 were at the highest level since 2007.
Recession Never-Never Land
The year 2007 was marked by economic boom, record high stock prices and an unemployment rate half of what it is now. Three years later, after a recession as the U.S. continued to struggle to pull itself out of the doldrums, CEO pay climbed in 2010 to an average of $9 million at Standard & Poor’s 500 companies. That’s a 24 percent increase over the average CEO salary from 2009, according to an AP study. It was also the first time in three years that CEO pay increased, and it increased across all pay categories, from salary to bonus, stock, options and more. Higher cash bonuses were common; two-thirds of executives were rewarded more than three times the amount they’d received in 2009.
Corporate profits were the justification
As corporate profits climbed at a rapid pace last year – 41 percent, reports the AP – and companies continued to cut costs from the lower end of the pay scale, CEO raises were justified by corporate boards. The stock market nearly doubled over 2010 from where it had been in March 2009, thanks to a bull market that produced significant gains in both stock and options.
How CEO pay was calculated
The AP study looked at executive salary, bonuses, perks, interest on deferred pay above market rates and the value of corporate stock and options awarded during the year. Executive data was provided by research company Equilar for 334 of the companies in the S&P 500. The AP’s analysis is considered to be the most comprehensive study of 2010 CEO compensation available.
Six of the 10 highest-paid CEOs came from media and entertainment companies, including the highest-paid CEO of 2010, Philippe Dauman of Viacom, who was paid $84.5 million. Leslie Moonves of CBS ($56.9 million); David Zaslav of Discovery Communications ($42.6 million); Brian Roberts of Comcast ($31.1 million); Robert Iger of Walt Disney ($28 million); and Jeff Bewkes of Time Warner ($26.1 million) rounded out the list of media barons.
According to AFL-CIO analysis of CEO pay data, the average CEO pay at S&P companies in 2010 broke down this way:
Salary: $1.1 million
Stock awards: $3.8 million
Option awards: $2.4 million
Non-equity incentive plan: $2.4 million
Pension and deferred compensation: $1.2 million
Other compensation: $215,911
Total: $11.36 million
Criticism of CEO raises
CEO pay expert Jesse Brill of CompensationStandards.com told AP that corporate boards need to consider how much wealth CEOs have already accumulated before approving record raises.
“Boards need to recognize that many CEOs already have enough in terms of motivation and lifetime wealth,” he said. “It is very frustrating to see boards keep giving them more.”
Shareholders will still have a say in such boardroom decisions, though they are typically only able to vote once every three years on what CEOs and executives are paid. Even then, such votes are not binding. They simply generate bad PR.