American CEOs Got Biggest Raise Since 2013 Last Year

American CEOs Got Biggest Raise Since 2013 Last Year

Equilar’s 2017 CEO Pay Trends report shows that the compensation packages of CEOs at the US’s 500 largest public companies rose by 6.1 percent in 2016 to a median of $11 million, representing the largest increase at the top of the payroll since 2013:

“Median CEO pay packages consistently climbed each year over the five-year study period examined for this report,” said Matthew Goforth, Equilar Research Manager and lead author of the report. “At the same time, boards continue to tweak incentive pay to align CEO interests with both company strategy and shareholder returns over the long term.”

During the study period, a growing number of companies began granting performance-based long-term incentives (LTI) to their chief executives, reaching 81.5% of Equilar 500 companies in 2016. Meanwhile, the Equilar report found that the prevalence of CEOs receiving time-based stock options fell to a low of 50.0% in 2016.

“There is no doubt that proxy advisors and large institutional investors have influenced pay design, particularly with respect to the growing use of performance-based equity plans and a continued shift away from stock options, in both prevalence of usage and weight,” said Virginia Rhodes, Lead Consultant with compensation consultant Meridian Compensation Partners. “These factors, coupled with the expense associated with options, have many companies opting for time-based restricted stock to provide the retentive element in their programs, as needed.”

The study comes at a time when executive pay is coming under ever-greater scrutiny. Despite the antipathy of the Trump administration and Congressional Republicans, activist investors have been pressuring the US Securities and Exchange Commission not to delay a rule imposed during the Obama administration in 2015 that would require public companies to disclose the ratio between the compensation of the CEO and the median annual compensation of every other employee in their proxy statements, starting with the 2017 fiscal year.

The city of Portland, Oregon, introduced a pay ratio reporting rule of its own late last year, along with a surtax on companies doing business in the city whose CEOs earn more than 100 times the median employee. Other cities are considering similar measures. CEO compensation also emerged as an issue in the UK’s recent general election, with Prime Minister Theresa May proposing to mandate that companies publish their pay ratios and give boards greater control over executive compensation, including some kind of input from employees.