CEOS’ pay raise of $800,000 leaves workers far behind
NEW YORK — Did you get a 7% raise last year? Congratulations, yours was in line with what CEOS at the biggest companies got. But for chief executives, that 7% was roughly $800,000.
Pay for CEOS at S&P 500 companies rose to a median of $12 million last year, including salary, stock and other compensation, according to data analyzed by Equilar for The Associated Press. The eightfigure packages continue to rise as companies tie more of their CEOS’ pay to their stock prices, which are still near record levels, and as profits hit an all-time high last year due to lower tax bills and a still-growing economy.
Pay for typical workers at these companies isn’t rising nearly as quickly. The median increase was 3% last year, less than half the growth for the top bosses. Median means half were larger, and half were smaller.
The survey showed that it would take 158 years for the typical worker at most big companies to make what their CEO did in 2018, seven years longer than if both were still at 2017 pay levels. And when top executives are already making so much more than their employees, the bigger percentage raises
compound the widening financial gap.
Anger about widening income inequality is rising around the world, from Capitol Hill to protests in streets. But it’s only slowly seeping into the conference rooms where boards of directors set the pay for CEOS. Boards are often more concerned with what a competitor may pay to poach their CEO than how much more that person makes versus the rest of the workforce.
The AP’S CEO compensation study included pay data for 340 executives at S&P 500 companies who have served at least two full consecutive fiscal years at their companies, which filed proxy statements between Jan. 1 and April 30.
Last year’s highest paid executive in the survey was David Zaslav of Discovery, the media giant behind HGTV and the Food Network. His total compensation was valued at $129.5 million, up 207% from a year earlier. Like other executives at the top of the rankings, most of Zaslav’s pay is not from cash but from stock awards or option grants that he will fully benefit from only if Discovery’s share price rises in the future.
Nearly 80% of Zaslav’s compensation last year came from stock options valued at $102.1 million, most of which he received as part of a new employment contract that runs through 2023. Companies often grant big options packages when top executives renew their contracts. Discovery’s stock returned 11% last year, beating the S&P 500’s loss of 4%, including dividends, and it has beaten the market since its initial public
offering in 2008.
Among central Ohio companies, American Electric Power CEO Nick Akins had total compensation of $12.2 million last year, up 6% from 2017, according to regulatory filings.
Cardinal Health CEO Mike Kaufmann, who took over the Dublin-based wholesale drug distribution company in the middle of the fiscal year, received $8.4 million. The prior CEO, George Barrett, took in $13.1 million, up 19% from the prior year, but below the $13.7 million he received in the 2016 fiscal year.
Total compensation for L Brands CEO and founder Leslie Wexner fell in 2018. Wexner received $4.6 million, down from $5.7 million in 2017 and $14.8 million in 2016.
New Big Lots CEO Bruce Thorn received $3.9 million for the last fiscal year while the former CEO, David Campisi, collected $8.3 million in the 2017 fiscal year and $9.8 million in the 2016 fiscal year.
Women, meanwhile, still remain relatively rare in the corner offices for S&P 500 companies, even though they enter U.S. companies at roughly the same rate as men. Of the 340 CEOS in this year’s survey, just 19 were women. Their median pay was $12.7 million last year, versus $11.2 million for men.
This is the second year the government has required companies to show how pay for top bosses compares with the pay for their typical worker. The measure is far from perfect, mostly because companies have a lot of flexibility in how to calculate the numbers.
Comparisons between companies can also be meaningless when one has mostly part-time workers in
developing countries while the other has office parks full of Ph.d.s in Silicon Valley. But now that companies have submitted two years of data, investors can see how the gap in pay is trending at individual companies.
At more than 40% of the companies in this year’s survey, the CEO’S pay rose by at least double the percentage of the median worker’s pay gain.
Across the economy, pay is climbing at a faster rate for workers, but the gains are still below where they usually are when the economy is this healthy. Average hourly pay rose 3.4% in February from a year earlier, the largest annual gain in a decade. Companies find that they have to pay more to hold on to staff after the unemployment rate dropped to a nearly 50-year low.
But the last time the jobless rate was almost this low, in the late 1990s, hourly pay rose at a 4% to 4.5% rate. Economists say several trends are holding back wage gains, including businesses facing intense pressure from online and overseas competitors. And with larger, multinational companies dominating more industries, workers have fewer alternatives to jump to in search of a raise.
“For the kind of numbers we’re seeing on the unemployment rate, or the length of the recovery, all those numbers would tell us that we’re in an incredibly good economy. But it’s not as rosy as those statistics suggest,” said Julia Coronado, an economist and president of Macropolicy Perspectives.
Median pay at AEP, for example, was $110,125, according to filings, while it was $51,434 at Cardinal Health. For L Brands, median total compensation was $14,186 and it was $8,746 at Big Lots.