Media Wrong About CEO Compensation

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Most CEOs earn nowhere near the compensation of their public company counterparts, according to the results of an exclusive Chief Executive Group study of 789 CEOs of privately held companies, which represent the overwhelming majority of firms in the economy.
The $9 million pay package the average S&P 500 company CEO brought home in 2010 causes hysterics in the media. But the vast majority of CEOs don’t take home anything close to that, according to a study of 789 CEOs conducted in April and May of 2011 by Chief Executive Group. In fact, the report showed a median compensation package of just $405,000 for private company CEOs with at least $5 million of company revenue—a hurdle representing just the largest 20 percent of U.S. companies.

The average private company CEO pay package for companies with more than $5 million in revenue was $1.3 million in 2010—up 4.4 percent from the 2009 average. But only the top quartile surpassed the million-dollar mark.

“Big company compensation numbers grab headlines because the numbers are eye-popping—and are readily available in public filings,” says Wayne Cooper, co-author of the 2011 CEO & Executive Compensation Report for Private Companies. “But there are 5.7 million companies in the U.S. and only 6,473 of these (0.13 percent) are public.”

“By surveying more than 780 CEOs themselves in one of the most complete efforts at measuring private company compensation ever undertaken, we found surprising results,” adds Chief Executive Group’s Michael Bamberger, who co-authored the report. “With half of CEOs at substantial private companies earning less than $405,000, making a generalization about CEO pay based on public company averages is equivalent to saying all actors are overpaid based on what Adam Sandler and Johnny Depp make.”

The median cash compensation for CEOs of private companies with revenue of between $250 million and $999.9 million was 3.8 times the median for CEOs of private companies with between $5 million and $9.9 million in revenue, and the gap was even wider at larger companies. For example, the median compensation for private company CEOs with revenues over $1 billion was 7.8 times that of the $5 million to $9.9 million revenue group. Yet, the top quartile compensation was $1,045,000—which means that almost three fourths of private company CEOs earned less than $1 million in 2010.

In addition, the perks the vast majority of CEOs enjoy (see Prevalence of Perquisites, p. 51) are rather modest. Access to personal tech gadgets and a company car hardly ever approach the likes of Dennis Kozlowski’s $6,000 shower curtains. In fact, only 4.5 percent of private company CEOs have personal access to a company jet.

More information about the 2011 CEO & Executive Compensation Report for Private Companies, which includes information on base salaries, bonuses, equity gains, benefits and perks and how CEO compensation varies by company size, industry, type of ownership and geographic region, can be found at ChiefExecutive.net/compreport.

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