Median CEO pay in 2013 crosses $10M for first time

CEO compensation crosses $10 million mark for first time as surging stock market boosts pay

5/28/2014
ASSOCIATED PRESS
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    Meyrowitz

    associated press

    • Meyrowitz
    Meyrowitz

    NEW YORK — They’re the $10 million men and women.

    Propelled by a soaring stock market, the median pay package for a chief executive officer rose above eight figures for the first time last year. The head of a typical large public company was paid a record $10.5 million, an increase of 8.8 percent from $9.6 million in 2012, according to an Associated Press/​Equilar pay study.

    Last year was the fourth straight that CEO compensation rose after a decline during the Great Recession. The median CEO pay package climbed more than 50 percent during that stretch. A chief executive now makes about 257 times the average worker’s salary, up sharply from 181 times in 2009.

    The best-paid CEO last year led an oilfield-services firm. The highest-paid female CEO was Carol Meyrowitz of retailer TJX Co. Inc., owner of TJ Maxx and Marshall’s. She was paid $20.7 million and was at No. 33 on the overall list.

    Female CEOs had a median pay package worth more than their male counterparts, $11.7 million versus $10.5 million for males. However, the AP/​Equilar study had only 12 female CEOs compared with 325 male CEOs who were polled.

    Over the last several years, companies’ boards of directors have tweaked executive compensation to answer critics’ calls for CEO pay to be more attuned to performance. They’ve cut back on stock options and cash bonuses, which were criticized for rewarding executives even when a company did poorly. Boards of directors have placed more emphasis on paying CEOs in stock instead of cash and stock options.

    The change became a boon for CEOs last year because of a surge in stocks that drove the Standard & Poor’s 500 index up 30 percent. The stock component of pay packages rose 17 percent to $4.5 million.

    “Companies have been happy with their CEOs’ performance, and the stock market has provided a big boost,” says Gary Hewitt, director of research at GMI Ratings, a corporate governance research firm. “But we are still dealing with a situation where CEO compensation has spun out of control, and CEOs are being paid extraordinary levels for their work.”


    The highest paid CEO was Anthony Petrello of oilfield-services company Nabors Industries, who made $68.3 million in 2013. Mr. Petrello’s pay ballooned as a result of a $60 million lump sum that the company paid him to buy out his old contract. Under that contract, Mr. Petrello could have been owed huge cash bonuses, and the company could have paid out tens of millions of dollars if he were to die or become disabled.

    Mr. Petrello was one of a handful of chief executives who received a one-time boost in pay because boards of directors decided to renegotiate CEO contracts under pressure from shareholders.

    CEO Richard Adkerson of Freeport-McMoRan Copper & Gold Inc. also received a one-time payment of $36.7 million to renegotiate his contract. His total pay, $55.3 million, made him the third-highest paid CEO last year.

    The second-highest paid CEO among companies in the S&P 500 was Leslie Moonves of CBS. Mr. Moonves’ total compensation rose 9 percent to $65.6 million in 2013, a year when the company’s stock rose nearly 70 percent.

    “CBS’s share appreciation was not only the highest among major media companies, it was near the top of the entire S&P 500,” CBS said in a statement. “Mr. Moonves’ compensation is reflective of his continued strong leadership.”

    Media industry CEOs were, once again, paid handsomely. Viacom Inc.’s Philippe Dauman made $37.2 million while Walt Disney Co.’s Robert Iger made $34.3 million. Time Warner CEO Jeffrey Bewkes was paid $32.5 million.

    The industry with the biggest pay bump was banking. The median pay of a Wall Street CEO rose by 22 percent last year, on top of a 22 percent increase the year before.

    BlackRock Inc. chief Laurence Fink made the most, $22.9 million. Kenneth Chenault of American Express Co. ranked second with earnings of $21.7 million.

    More than two-thirds of CEOs at S&P 500 companies received a raise last year, according to the AP/​Equilar study, because of the bigger profits and higher stock prices.

    CEO pay remains divisive in the United States. Large investors and boards of directors argue that they need to offer big pay packages to attract talented men and women who can run multibillion-dollar businesses.

    “If you have a good CEO at a company, the wealth he might generate for shareholders could be in the billions,” says Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank. “It might be worth paying these guys millions for doing this type of work.”

    CEOs are still getting much bigger raises than the average U.S. worker.

    The 8.8 percent increase in total pay that CEOs got last year dwarfed the average raise U.S. workers received. The Bureau of Labor Statistics said average weekly wages for U.S. workers rose 1.3 percent in 2013.