S&P 500 CEO pay growth slows

Spare a thought for another casualty of the tougher economic environment: CEO pay growth has slowed over the past year, according to a new report from ISS Corporate Solutions, Inc. (ICS).

The firm’s preliminary analysis of CEO pay at S&P 500 companies found that the median pay increase was 3.1%, based on the latest proxy filings, which was down from 13.2% last year.

Despite the slower growth, median pay for the companies covered in the report came in at US$14.3 million. The median base salary was US$1.3 million, up 2.9% from the previous year.

At the same time, bonus and annual incentive payouts were down 5.4% to a median of US$2.6 million, it said.

“Lower bonus and annual incentive payouts were expected over the last year given a challenging operating environment for many blue-chip companies,” said Roy Saliba, managing director at ISS Corporate Solutions, in a release.

However, stock and option awards to CEOs rose year over year, ICS said.

The median stock award came in at US$8.5 million (up 9.5%) and the median option award was US$3 million, which represented a median increase of 8.3%.

Saliba said it was surprising to see “the magnitude of increases in stock and option awards, particularly when viewed against the backdrop of last year’s market volatility.”

That said, ICS noted that many of these stock and option awards would have been granted in early 2022 or late 2021, before market conditions shifted sharply.

ICS also reported that pay increases were not universal. In fact, CEO pay increased at 58.2% of S&P 500 companies but fell at the others.

At companies where pay fell, the median decline in CEO pay was 12.8%, and the one-year total shareholder return for these firms was a 12% drop for the most recent fiscal year.

For companies where CEO pay increased, the median increase was 11.5%, and the total shareholder return was a more modest 8.4% drop, ICS reported.

The research also found that trends in CEO pay and shareholder returns were not correlated in a number of industries.

For instance, the energy sector was the best performer in terms of shareholder return, with a median one-year return of 71.4%. Yet CEO pay in the sector declined by 0.8%, it noted.

Conversely, the auto sector was the worst performer, with a median return of -42.9%, and CEO pay in the sector rose 1.5%.

“This underscores a disconnect between CEO pay and short-term share performance across a number of industries,” it said, noting several industries where shareholder returns dropped at double-digit rates but CEO pay increased by double digits.

“These industries include banks, financial services, technology hardware and equipment, and equity REITs,” it said.