The Advisors' Blog

Compensation Advisory Partners (CAP) recently reported on its review of CEO pay levels among 50 companies with fiscal years ending between August and October 2024. Here are some key findings from the report:

2024 median financial performance – as measured by revenue, earnings before interest and taxes (EBIT), and earnings per share (EPS) – was generally flat and consistent with 2023 performance.

Median CEO total direct compensation increased +9% year over year, driven by a +14% increase in actual bonus payout and a +7% increase in the grant-date value of long-term incentives (LTI).

For the second year in a row, median bonus payouts for CEOs were around target (i.e., 104% of target). Although financial performance was generally flat and annual incentive achievement was around target, CEO bonus payouts were up significantly. This is because, in general, companies with significant increases in bonus payouts (on average, approximately +280% increase) either rebounded from low payouts in 2023 or had continued sustained performance in 2024 and these increases were larger than the percentage change for companies that saw a decline in bonus (approximately 45%, on average).

It also found that approximately 25% of these companies adjusted an executive’s payout through individual performance or discretionary adjustments.

Less than half of the Early Filers use individual performance as a component of the annual incentive payout. Companies use individual performance to align the incentive payout with an executive’s contribution to the company and the results can raise or lower an executive’s payout relative to corporate performance.

Companies can also make discretionary adjustments to recognize overall company performance (more broadly than incentive plan metrics). Similar to individual performance, these adjustments may raise or lower the bonus payout. Only a handful of Early Filers made discretionary adjustments in 2024.

For 2025, CAP anticipates modest increases to CEO LTI given strong 2024 TSR performance, but they include cautionary notes. First, they say macroeconomic uncertainty is already impacting TSR (slightly down since September 30), and the unknown impact of tariffs means that some companies may have — and some companies may have not — incorporated tariff impacts in setting compensation metrics targets. My takeaway is that 2025 is going to be (already is) a very complicated and challenging year for incentivizing and retaining executives, disclosing decisions and garnering investor support for pay programs.

– Meredith Ervine