Record profits for big companies spur 6% rise in CEO pay
Companies limited cash bonuses and gave out more stock awards, a win for shareholder activists advocating compensation more closely tied to performance.
The Associated Press
NEW YORK — Profits at big U.S. companies broke records last year, and so did pay for CEOs.
The head of a typical public company made $9.6 million in 2011, according to an analysis by The Associated Press using data from Equilar, an executive-pay research firm.
That was up more than 6 percent from the previous year, and marks the second year in a row of increases. The figure is also the highest since the AP began tracking executive compensation in 2006.
Companies trimmed cash bonuses but handed out more in stock awards. For shareholder activists who have long decried CEO pay as exorbitant, that was a victory of sorts because the stock awards are being tied more often to company performance. In those instances, CEOs can't cash in the shares right away: They have to meet goals first, like boosting profit to a certain level.
The idea is to motivate CEOs to make sure a company does well and to tie their fortunes to the company's for the long term. For too long, activists say, CEOs have been richly rewarded no matter how their companies have fared — "pay for pulse," as some critics call it.
CEOs managed to sell more, and squeeze more profit from each sale, despite problems ranging from a downgrade of the U.S. credit rating to an economic slowdown in China and Europe's debt crisis.
Still, there wasn't much immediate benefit for shareholders. The S&P 500 ended the year unchanged from where it started.
Including dividends, the index returned a slender 2 percent.
Shareholder activists, while glad that companies are moving a bigger portion of CEO pay into stock awards, caution that the rearranging isn't a cure-all.
For one thing, companies don't have to tie stock awards to performance. Instead, they can make the awards automatically payable on a certain date — meaning all the CEO has to do is stick around.
And the main concern of many shareholders — that pay is just too much, no matter what the form — has yet to be addressed.
"It's just that total (compensation) is going up, and that's where the problem lies," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
The typical American worker would have to labor for 244 years to make what the typical boss of a big public company makes in one. The median pay for U.S. workers was about $39,300 last year. That was up 1 percent from the year before, not enough to keep pace with inflation.
To determine 2011 pay packages, the AP used Equilar data to look at the 322 companies in the S&P 500 that had filed statements with federal regulators through April 30. To make comparisons fair, the sample includes only CEOs in place for at least two years.
Among the AP's other findings:
• David Simon, CEO of Simon Property, which operates malls around the country, is on track to be the highest-paid in the AP survey, at $137 million. That was almost entirely in stock awards, which alone could eventually be worth $132 million, but some of which won't be redeemable until 2019.
This month, Simon Property shareholders rejected Simon's pay package by 73 percent of the votes cast. But the company said Simon's performance has been stellar and it has to pay him enough to keep him in the job.
Simon's paycheck looks paltry compared with that of Apple CEO Tim Cook, whose pay package was valued at $378 million — almost entirely in stock awards — when he became CEO in August. Cook wasn't included in the AP study because he is new to the job.
• Of the five highest-paid CEOs, three were also in the top five the year before. All three are in the TV business: Leslie Moonves of CBS ($68 million); David Zaslav of Discovery Communications, parent of Animal Planet, TLC and other channels ($52 million); and Philippe Dauman of Viacom, which owns MTV and other channels ($43 million).
• The 50 highest-paid CEOs for 2011 included at No. 10 Alan Mulally, of Ford Motor, and Jim McNerney, of Boeing, No. 42.
• About two in three CEOs got raises. For 16 CEOs in the sample, pay more than doubled from a year earlier, including Bank of America's Brian Moynihan (from $1.3 million to $7.5 million), Marathon Oil's Clarence Cazalot Jr. (from $8.8 million to $29.9 million) and Motorola Mobility's Sanjay Jha (from $13 million to $47.2 million).
• CEOs running health-care companies typically made the most ($10.8 million). Those running utilities made the least ($7 million).
• Perks and other personal benefits, such as hired drivers or personal use of company airplanes, rose only slightly, and some companies cut back, saying they wanted to align their pay structure with "best practices."