January 27, 2022
S&P 500 CEO Compensation Trends: Still Increasing Amidst Pandemic
CEO pay continues to be scrutinized by long-term investors, employees, activist investors, & the media. This Pay Governance memo gives us a sneak peek at where they think CEO pay is headed, after analyzing pay data – consisting of base salaries, actual bonuses (not target), and reported grant date fair value of long-term incentive awards – of S&P 500 companies with CEOs of 3+ years tenure. Here is an excerpt of their CEO pay projections:
– We expect 2021 overall CEO actual TDC [total direct compensation] to increase in the low- to mid-single digits due to stronger financial results than projected at the beginning of the year when bonus goals were set; there will be some variation with strong performing industries likely seeing increases in compensation.
– The Aggregate S&P 500 Index year-over-year revenue and operating income for 2021 are currently forecasted to increase by 16% and 37%, respectively (S&P Capital IQ).
– We expect median CEO target pay increases in early 2022 to be in the mid-single digits and possibly higher given very strong financial and TSR performance (S&P 500 was +29% in 2021); this increase will be primarily made by increases in LTI compensation.
– In certain high-growth industries (e.g., technology and biotechnology) and high-performing companies, CEO increases could be greater than 10% (primarily with larger LTI awards) because of a highly competitive labor market, while executives in slow-growth industries or heavily impacted companies might see no increases.
– Emily Sacks-Wilner