CEO Pay Continues to Surge: Take Action by Joining USPX

According to GMI, rising share prices helped drive a 15% pay hike for CEOs in 2011, with the average compensation package hitting $5.8M. That’s on top of a 28% pay rise in 2010.  Inflation was about 2.7% last year. The census bureau reported that typical family dropped for the third year in a row. The median family income in 2010 was $49.445.

The survey also found:

  • CEOs in the top 500 companies, enjoyed, on average, total realized compensation of $12.1m
  • Annual salary has risen just 3% this year on average compared to 18% last year. But compensation from share schemes has soared.
  • The 10 highest paid CEOs made about 78% of their compensation through stock options and other share sales.
  • The highest paid CEO so far is Michael Johnson of direct marketing firm Herbalife, who raked in $89,419,474 in 2011.
  • Three of the 10 highest paid CEOs thus far in 2012 are from the software industry.

Greg Ruel, the report’s author, said overall average salaries had increased only marginally in 2012, but CEOs were now reaping the benefit of share awards they were granted in leaner times. As the stock markets have bounced back, they have made fortunes.

American CEOs enjoy 15% pay rise in second year of double-digit hikes, the Guardian, 5/2/2012.

Citigroup shareowners voted against CEO Vikram Pandit pay package of $14.9m. Yesterday, shareowners rejected the proposed pay package at Mylan Inc. even after a proxy solicitation effort by the company. Still, of the 461 largest companies nationwide that have reported “say on pay” votes, just eight have failed, according to Semler Brossy Consulting Group, a pay consultant in Los Angeles. At nearly 75 percent of those companies, the executive compensation packages passed by a more than 90 percent margin, Semler Brossy said. Mylan shareholders nix execs’ pay, Pittsburgh Post-Gazette, 5/5/2012.

Looking at the GMI repport, CEO by company market-cap rose as follows:

  • S&P 500 median up 31.45% to $8,797,473
  • S&P mid-cap median up 14.66% to $4,742,949
  • S&P small-cap median up 23.79% $2,577,756

End the “Lake Wobegone” effect. Most CEOs are rated above average every year by their board leading to a spiral of wage inflation. Join the United States Proxy Exchange (USPX or and start voting down pay packages above median. From our Shareowner Guidelines For Say-On-Pay Voting.

The aggregate compensation paid by public companies to their top-five executives during the period 1993-2003 totaled about $350 billion, and the ratio of this aggregate top-five compensation to the aggregate earnings of these firms increased from 5 percent in 1993-1995 to about 10 percent in 2001-2003. We find this to be a dangerous, unsustainable trend that could re-purpose the nature of the firm.

I’m trying to update these figures but I doubt pay has been going down, even as a proportion earnings. I’m also trying to update the pay figures used in the Shareowner Guidelines For Say-On-Pay Voting, which uses a larger database from Equilar.

The whole pay problem started with a change, as I recall, in 1991 that required pay above $1M to be tied to performance. Politicians in charge of pubic pension funds supported that change because those who wanted it agreed to support the fund’s initiative to reduce the SEC requirements concerning communications between funds on proxy issues.

I’ll bet those old members of the Council of Institutional Investors now regret that move. Unfortunately, most public pension funds are still focused on pay for performance and have no policy supporting the need to ratchet pay back down a little. It looks like retail investors will have to lead the way. Vote down pay above median and also vote out members of the compensation committee… unless there are extraordinary circumstances.

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