WASHINGTON • CEO pay is up - yet again. A booming stock market and bulging equity awards propelled the median 2017 compensation for chief executives of the 100 largest companies to the highest figure in 11 years, according to a new analysis.
The report, released on Wednesday by executive compensation and governance research firm Equilar, examines pay of the 100 largest public companies by revenue, and comes in advance of broader CEO pay rankings that typically arrive later in the spring and analyse the companies of the entire Standard & Poor's 500-stock index.
While the median pay increase for CEOs was slightly lower than the year prior, at 5 per cent instead of 6 per cent, the median CEO pay package was valued at US$15.7 million (S$20.6 million), notching above 2016's previous high of US$15 million.
Equilar's director of content and communications Dan Marcec said the number was not surprising given that the majority of CEO pay is made up of stock grants and last year was a banner year for market performance: The S&P 500 index saw a nearly 20 per cent climb.
"We've seen continued increases over the past seven or eight years and it's consistent with a bull market. The higher stock prices are on the whole, the higher CEO compensation is going to be," he said.
New to Equilar's analysis is the inclusion of a CEO-to-worker pay ratio for each company, thanks to a US Securities and Exchange Commission rule that went into effect this year. The rule requires publicly traded companies to release a ratio of what their CEOs make in comparison to their median paid worker.
For the 100 largest companies, the ratios tend to be far higher than the broader market, with a median of 235-to-one, compared with 72-to-one for companies in the Russell 3000 index that have reported their 2017 numbers so far.
In other words, CEOs of the largest companies tend to get paid a lot more than others.
Each year, the list produces some eye-popping numbers in part because CEO pay packages are valued on the date new stock awards are granted. As a result, multi-year grants that CEOs only get access to over time can bulk up the size of a CEO's pay package one year, only to see the number plummet - albeit still to relatively high numbers - the following year.
The highest-paid CEO in this year's study is Broadcom's Mr Tan Hock Eng. The company has recently made the news after US President Donald Trump blocked its US$117 billion bid for Qualcomm and, weeks later, for changing its legal domicile from Singapore to the United States.
The Penang-born Mr Tan's 2017 package was valued at US$103.2 million. While that is a massive number, it includes a new stock grant valued at US$98.3 million that will pay out over a period of several years only if Broadcom meets certain thresholds.
Meanwhile, the CEO who saw the biggest drop in pay was Charter Communications' Mr Thomas Rutledge, whose 2017 compensation was US$7.7 million, 92 per cent lower than in 2016, when his haul was valued at US$98.5 million. The 2016 payment included a US$78 million equity award connected to a new employment agreement that would be paid out over five years.
And who was the lowest-paid CEO in this ranking of the 100 largest companies? That would be the Oracle of Omaha, Mr Warren Buffett, whose stock holdings may number in the billions but whose annual compensation from Berkshire Hathaway, where he is CEO, is limited.
According to the company's proxy, he received a US$100,000 salary - the same salary he has received for more than 25 years - but no bonus or new stock awards.