The CEO’s salary increased by 17% in 2021 as profits increased; workers followed
NEW YORK (AP) – Even when ordinary workers win their biggest increases in decades, they look small compared to what CEOs get.
The typical compensation package for CEOs running S&P 500 companies rose 17.1% last year, to a median $ 14.5 million, according to data analyzed for The Associated Press by Equilar.
The gain towers over 4.4% increase in wages and benefits provided by workers in the private sector through 2021, which was the fastest recorded back to 2001. The increases for many ordinary workers also failed to keep pace with inflation, which reached 7% at the end of last year.
The group salary decreased as stock prices and earnings rose sharply as the economy roared out of the short-term recession in 2020. Because much of a CEO̵[ads1]7;s compensation is linked to such performancetheir wage packages increased after years of largely moderate growth.
In many of the most notable packages, such as Expedia Groups valued at $ 296.2 million and JPMorgan Chases $ 84.4 million, boards gave particularly large allocations of shares or stock options to newly appointed CEOs navigating their companies through the pandemic or to established leaders they wanted to convince to hang around.
CEOs can often not make money on such stocks or options for years, or possibly ever, unless the company achieves performance targets. But companies still need to reveal estimates of how much they are worth. Only about a quarter of the typical salary package for all S&P 500 CEOs last year came as actual cash they could have.
Regardless of composition, the abyss of pay between CEOs and the ordinary workers they supervise increases. In half of the companies in this year’s salary survey, it will take the worker in the middle of the company’s salary scale at least 186 years to do what the CEO did last year. That is up from 166 a year earlier.
At Walmart, for example, the company said its median employee earned $ 25,335 in compensation last year. This means that half of the workers earned more, and half earned less.
That’s up 21% from $ 20,942 a year earlier and came when the company’s average hourly wage for U.S. employees rose from $ 14.50 in January 2021 to more than $ 17 at the moment. This increase was greater than the increase received by CEO Doug McMillon, on a percentage basis. But the 13.7% increase gave him a total package worth $ 25.7 million.
Anger grows over such an imbalance. Surveys suggest that Americans across political parties view CEO salaries as too high, and some investors are retiring.
Workers are trying to organize unions across the country, and the “big resignation” has encouraged millions to quit to find better jobs elsewhere. The US government counted more than 4 million quits during April 2021 alone, the first time it happened. The monthly number has since peaked at 4.5 million twice.
“It’s going to add a huge cost to your company’s bottom line, to have that kind of turnover rate,” said Sarah Anderson, director of the Global Economics Project at the Progressive Institute for Policy Studies.
“They should think about what kind of message they are sending to these people, if they are really valued in their jobs,” Anderson said. “When the guy in the corner office earns hundreds if not thousands more times, it sends a really demoralizing message.”
Profits for the CEO’s salary have been declining in recent years, with median growth declining from 8.5% in 2017 to 4.1% in 2019. It ticked back to 5% in 2020, which was a complicated year because the pandemic closed the economy and profits in many companies fell.
For 2020, many companies changed the intricate formulas they created to determine the salaries of CEOs. The adjustments compensated for losses caused by the pandemic, which many boards said was an extraordinary event beyond the CEO’s control.
Then came 2021. Thanks to a reopened economy, super-low interest rates from the Federal Reserve and other factors, stock prices rose and the S&P 500 jumped almost 27%, setting records throughout the year. Earnings per share rose by about 50%.
Throughout the year, CEOs had to navigate congested supply chains and shortages of chips and other key materials that affected businesses across industries, said Dan Laddin, a partner at Compensation Advisory Partners, a consulting firm that works with boards.
“All of this led to a desire to truly reward” leaders, “said Kelly Malafis, also a partner at Compensation Advisory Partners,” because the financial performance was there and the perception was that the leadership teams were exceptional when it came to navigating the situation and delivering. results. ”
Last year’s jump of 17.1% for the median salary of S&P 500 CEOs was the largest since an increase of 23.9% for the compensation packages in 2010, according to data analyzed by Equilar.
Think of Marry Barra, CEO of General Motors. Her industry was particularly hard hit by the lack of computer chips, which narrowed car production.
Nevertheless, GM’s board highlighted how the company continued to deliver record revenues before interest, taxes and some other items. The carmaker also accelerated the development of its electric vehicles. These are two of the factors affecting Barra’s salary, and her compensation rose 25.4% to $ 29.1 million.
“I would hope that the company with record profits will realize that the workers who do the work are the ones who generate the revenue,” said Dave Green, a hot metal driver at a GM plant in Bedford, Indiana. “We’re just trying to make it.”
He specifically mentioned temporary employees who earn about $ 16 an hour, who have to work for years before they come in as full-time employees and do not get many opportunities for days off in the meantime.
“The new people who come in, their children are not going to get the opportunities my children had,” said Green, who has two daughters and joined GM as a summer helper in 1989.
Closer to the top of the rankings for CEO salaries last year was JPMorgan Chase’s Jamie Dimon, whose $ 84.4 million compensation package was the fifth highest in the AP survey. It was up 166.7% from the previous year, and most came from the allotment of share options worth 52.6 million dollars.
The board said it provided the alternatives because of the desire for Dimon, 66, to continue to lead the company for significantly more years and a “unique turning point in Mr. Dimon’s tenure.” It also said that the options were not part of his regular annual compensation, and that he would have to wait at least five years to start exercising them.
Nevertheless, only 31% of investors at JPMorgan Chase’s annual shareholders’ meeting recently gave a thumbs up to Dimon’s salary package. However, the vote is for guidance only and does not force the company to make changes.
Last year, a median of 92.6% of shareholders approved what is called their “Say On Pay” vote in the AP’s survey. It was only slightly down from 93.4% the year before.
AP’s and Equilar’s compensation study included salary data for 340 CEOs of S&P 500 companies that have been in their companies for at least two financial years, which submitted proxies between 1 January and 30 April. Some high-profile CEOs are not included because they do not meet the criteria, such as Amazon’s Andy Jassy and Twitter’s Parag Agrawal. The survey does not include changes in the value of CEOs’ pension benefits and certain other items in the sum for compensation.
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AP Business Writers Matt Ott, Tom Krisher, Anne D’Innocenzio, Michael Liedtke and Ken Sweet contributed.