Getting Real About CEO Pay
When CEOs exceed expectations or outpace rivals they tend to reap big rewards and when they fall short of financial hurdles they tend to lose out on pay and bonuses. According to a reports from the Wall Street Journal based on a study by Equilar more and more S&P 500 CEOs have been clearing or exceeding the goals set by directors. But is this the complete picture? Since when is public company compensation representative for all CEOs?
September 13 2013 by ChiefExecutive.net
Equilar’s study looks at the pay and compensation of large public companies, but the reality is that most CEOs do not enjoy the enormous multi-million dollar pay packages of the Fortune 500. In reality, the median private company CEO earned $326,000 in cash compensation in 2012 –base salary and bonus, with total compensation of $360,000 including benefits, perks and equity gains. This is the finding of a recent Chief Executive Group research in CEO pay and Senior Executive compensation in Private Companies report. LINK
Most media reports focus on the $15.1 million average annual pay package for the CEOs of the largest 200 public companies. The implication is that this 0.001 percent of companies is representative of all CEOs in the country. Of the roughly 30 million businesses in the U.S. fewer than 6,000 are publicly traded and only 8 percent of these are eligible to make the S&P 500.
While the Equilar study suggests that more and more CEOs are hitting their targets due in part to measures such as performance-based restricted shares, the overall picture is necessarily incomplete. Most CEOs in the S&P 500 are professional managers whose stock holdings tend to be relatively small by virtue of the huge capitalizations. Most private company CEOs on the other hand, tend to be those who have built their businesses over longer periods and regularly contribute to same communities in which they operate.
A typical CEO would find it more useful to benchmark himself against one’s peers as opposed to, for example, a Terry Lundgren of Macy’s who earned a payout of $22.5 million, or a John Hammergren of McKesson who netted $27.4 million. (In the latter case McKesson’s board awarded Hammergren more shares than they had earned by the initial comp formula.) For more information about the 2013-2014 CEO & Senior Executive Compensation Report for Private Companies, which includes benchmarking data by quartile on base salaries, bonuses, perks, and equit compensation for CEOs and nine other senior executive positions (e.g. president, COO/GM, CFO, CMO, VP Sales, VP R&D, VP HR) and how these benchmarks vary by company size, industry, type of ownership and other key variables, please visit: ChiefExecutive.net/compreport.