Who got pay raises of 27 to 40% last year? The CEOs of America’s large corporations, according to a new study by GMI Ratings reported in the Guardian. Not just base salary, but pensions, perks and parachutes all increased for top U.S. execs; the ten biggest earning CEOs made a combined $770 million in 2010. For chief executives of S&P 500 companies, total compensation (including stock) increased by a median of 36.47%. CEO compensation was basically flat the year before, with base salaries in 2009 increasing by about 2 percent. In contrast, the average worker’s pay in 2010 barely kept up with inflation. The AFL-CIO calculates that the average CEO pay in the U.S. in 2010 was 343 times the median worker’s pay
The global recession did have some impact on big bankers’ paychecks: no financial professions are among the top 10 highest paid CEOs, while three of the ten are from the healthcare/pharmaceutical industries. The top “earner” was pharma company McKesson CEO John Hammergren, who made $145 million in 2010, mostly from stock options, which works out to a cool $276 for every minute in the entire year.
Sources differ on specific amounts, but CEO salary and benefits packages are staggering as executives seem to compete for the most lavish packages. According to the GMI study, Ronald Williams, CEO of health insurer Aetna, made $57.8 million in 2010 (USA Today reported that Williams’ pay and stock for 2010 amounted to $68.7 million.) The Guardian notes, “Aetna’s stock price declined by 70% from when Williams assumed the role of CEO in February 2006 until his retirement” in 2010. Last June Williams was appointed to the Compensation & Benefits Committee at Johnson & Johnson; one can only wonder how his view of appropriate compensation levels will affect that company. A GMI study from this fall identified Aetna as one of the worst scoring companies in a survey of the quality of compensation policy and pay practices at S&P 500 corporations.
Not Trickling Down to Pay or Hiring
Well compensated or otherwise, most CEOs do not expect to be paying any more workers next year. The latest report from the Business Roundtable (CEOs of large US companies) shows that only about a third of its members plan to create jobs in 2012 and 24% expect to cut jobs, with 42% expecting no change in their workforce size.
Disclosure Rules Delayed
Provisions of the Dodd Frank Wall Street Reform and Consumer Protection Act will require companies to compile and make public a pay ratio, comparing CEO pay to the average employee’s salary. The provisions have been contested by corporate interests, who say the ratio is costly to compile and not as relevant as a pay versus performance disclosure. Last July, the SEC delayed the executive compensation rules, meaning they will not be in effect until late 2012.
Image by Pavel Losevsky via Dreamstine