Monday, July 4, 2022

Despite recent worker benefits, CEOs win the race for pay — again

NEW YORK — Even when regular employees win their biggest earnings in decades, they look less than a CEO.

Typical compensation packages for CEOs who run S&P 500 companies rose 17.1% last year to an average of $14.5 million, according to data analyzed by the Associated Press by Equilar.

Profits tower over a 4.4% increase in wages and benefits received by private sector workers during 2021, the fastest on record going back to 2001. The uptick for many rank-and-file workers also failed to keep up with inflation, which reached 7% late last year.

CEO salaries took off as stock prices and profits jumped sharply as the economy pulled out of its brief 2020 recession. Because much of CEO compensation is tied to such performance, their salary packages mostly increased after years of moderate growth.

Among the most lucrative packages, such as Expedia Group’s $296.2 million and JPMorgan Chase’s $84.4 million, boards have given recently appointed CEOs a particularly large share of stock or stock options to navigate their companies through the pandemic or established leaders. Grant given. Wanted to persuade him to move.

CEOs often may not redeem such stocks or options for years, or possibly never, until the company meets performance goals. But companies will still have to disclose estimates of how much they are worth. Last year only a quarter of the typical salary package for all S&P 500 CEOs came in the form of actual cash they could pocket.

Whatever its structure, the pay gap between the CEO and the rank-and-file workers they look after is widening. In half of the companies in this year’s salary survey, it would take an employee at least 186 years between the company’s pay scales, which their CEO did last year. This is up from 166 a year ago.

For example, at Walmart, the company said its average associate earned $25,335 in compensation last year. This means that half of its employees made more, and half made less.

That’s up 21% from $20,942 a year ago and the company’s average hourly wage for U.S. associates increased from $14.50 in January 2021 to more than $17 currently. The increase was larger than what CEO Doug McMillan received on a percentage basis. But his 13.7% growth put him a total package worth $25.7 million.

Anger is growing over such imbalances. Surveys show that Americans of all political parties view CEOs as having a very high salary, and some investors are pushing back.

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Workers are trying to organize unions across the country, and the “great resignations” have encouraged millions to leave to find better jobs elsewhere. The US government counted over 4 million qubits during April 2021 alone, the first time this has happened. Monthly numbers have doubled above 4.5 million since then.

“To have such turnover rates is going to add huge costs to the corporate bottom lines,” said Sarah Anderson, director of the Global Economy Project at the Progressive Institute for Policy Studies.

“They should think about what kind of message they’re sending to those people, about whether they’re really valuable in their jobs,” Anderson said. “When the guy in the corner office is making several hundred if not thousands of times more, it’s sending a really demoralizing message.”

Gains for CEO salaries have been slow in recent years, with average growth declining from 8.5% in 2017 to 4.1% in 2019. It ticked back up to 5% in 2020, a complicated year as the pandemic shut down the economy and slashed profits for many companies.

For 2020, many companies revamped the complex formulas created for determining their CEO salaries. The tweaks made to the damage caused by the pandemic, many boards said were an extraordinary event outside the CEO’s control.

Then came 2021. Thanks to the reopening economy, super-low interest rates from the Federal Reserve and other factors, stock prices soared and the S&P 500 jumped nearly 27%, setting records during the year. Earnings per share rose nearly 50%.

Throughout the year, CEOs had to navigate supply chains and shortages of chips and other key materials that hit businesses across industries, said Dan Ladin, partner at the consulting firm Compensation Advisory Partners, who worked with the board.

“It all really led to a desire to be rewarded”, said Kelly Malafis, also a partner at Compensation Advisory Partners, “because the financial performance was there, and the idea was that the management team could navigate the situation and see the results.” Were exceptional in giving.”

Last year’s 17.1% jump for the average salary of an S&P 500 CEO was the biggest since the 23.9% increase for the 2010 compensation package, according to data analyzed by Equilar.

Consider Mary Barra, CEO of General Motors. His industry was particularly badly hit by a shortage of computer chips, which affected auto production.

Still, GM’s board highlighted how the company still posted record earnings before interest, taxes and a few other items. The automaker also accelerated development of its electric vehicles. Those are two factors that affected Barra’s salary, and her compensation rose 25.4% to $29.1 million.

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“I expect a corporation making record profits will recognize that it’s the workers who do the work that are generating the revenue,” said hot metal driver Dave Green of a GM facility in Bedford, Indiana. “We’re just trying to get by.”

He specifically cited temporary workers who earn about $16 an hour, who have to work years before coming in as full-time employees and in the meantime don’t get many opportunities for days.

“There are new people coming in, their kids won’t have opportunities for my kids,” said Green, who has two daughters and started at GM in 1989 as a summer assistant.

Close to the top of the rankings for CEO salaries last year was JPMorgan Chase’s Jamie Dimon, whose compensation package stood at $84.4 million, the fifth largest in an AP survey. That was up 166.7% from a year earlier, and most of it came from the award of stock options worth $52.6 million.

The board said it provided the options because of the desire of Dimon, who is 66, to lead the company for more years and “a unique turning point in Mr. Dimon’s tenure.” It also said that the options were not part of their regular annual compensation and they would have to wait at least five years to start exercising them.

Still, only 31% of investors at JPMorgan Chase’s annual meeting of shareholders recently gave a thumbs up to Dimon’s salary package. The vote is advisory only, and does not compel the company to make changes.

Last year, 92.6% of shareholders approved of their “say on pay” vote in an AP poll. This was only slightly down from 93.4% a year ago.

AP and Equilar’s compensation study included salary data for 340 CEOs at S&P 500 companies who have served at least two fiscal years at their companies who filed proxy statements between January 1 and April 30. Some high-profile CEOs are not included because they don’t fit the criteria like Andy Jassi of Amazon and Parag Agarwal of Twitter. The survey doesn’t count changes in the value of CEOs’ pension benefits and some other items in its sum for compensation.

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AP Business Writers Matt Ott, Tom Crischer, Anne D’Innocenzio, Michael Lidtke and Ken Sweet contributed.

Nation World News Desk
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