Is CEO pay up or down? It depends on how you look at it.
Two reports examining CEO pay were recently released, and the results are stunningly different at first glance. Even though they were prepared by same data source, the executive compensation research firm Equilar, one showed a slight pay rise for CEOs while the other showed a decrease.
The Associated Press’s report, released May 25, found median pay among 341 CEOs in the S&P 500 rose 4.5 percent from $10.3 million to $10.8 million — or with a median raise of $468,000, “more than 10 times what the typical U.S. worker makes in a year,” AP reported.
The other, published Friday by the New York Times, looked at 200 CEOs of large companies, and found that their average pay was $19.3 million, down 15 percent from 2014, when it was $22.6 million.
Why the difference? They didn’t look at the same CEOs. The AP report looked at pay trends across the S&P 500 index who served two full consecutive fiscal years at their companies and had filed proxy statements by April 30 this year. But the Times report ranked all public companies with at least $1 billion in revenues by their CEOs’ pay, and then examined the average among the top 200 compared to the year before.
While there was plenty of crossover — Expedia CEO Dara Khosrowshahi, who topped both reports with 2015 pay valued at $94.6 million — one list represents how pay for big-company CEOs is trending overall, while the other looks at only the lavishly compensated.
The results appear more logical than they seem at first glance. One shows the steady escalation in pay at the largest companies — a long-standing trend that is unlikely to change. The other shows relative restraint at the most stratospheric levels, as investor activism and pressure perhaps start to hold back some of the most jaw-dropping numbers. “We saw fewer large awards,” said Dan Marcec, the director of content for Equilar, in an interview about the reports’ findings.
In either case, whether looking at CEO pay across the largest public companies or just the super-compensated, it’s worth noting that the reports are based on figures that don’t necessarily represent what CEOs took home. Studies reporting trends in CEO compensation rely on figures pulled from the “summary compensation tables” in company filings. Those numbers are calculated based on how the Securities and Exchange Commission requires companies to value CEO compensation, which is based on the target values of stock grants and valuations for executive pensions, rather than what the CEO actually “took home.”
“In most cases, the CEOs are taking more or less than what was disclosed in that summary compensation table — and sometimes significantly more or less,” said John Roe, executive director of ISS Corporate Solutions, a subsidiary of Institutional Shareholder Services providing company research.
The amount listed for Khosrowshahi, for example, is part of a five-year employment agreement including stock only available to him over several years, and is based on his continued employment, as well as the company’s stock. “Dara Khosrowshahi has been a transformational CEO for Expedia,” company spokesman Sarah Gavin said in a statement. “His leadership has elevated the company into a global leader in the online travel market.”
Still, even if that payday hasn’t yet been fully handed out, it’s hard to argue that its potential value, even over a period of several years, is quite a rich reward. And really, these studies remind us whether the data is sliced one way that shows CEO pay going up or another way that shows it going down. A simple fact remains: $19.3 million, or even $10.8 million, is a lot of money to earn in one year.
