Even when regular employees get the biggest raises in decades they are still compared to what CEOs are getting.
According to Equilar data, the average compensation package for chief executives of S&P 500 companies soared 17.1% to $14.5 million last year.
This gain is more than the 4.4% increase of wages and benefits that private-sector workers received through 2021. It was the fastest recorded since 2001. Many rank-and-file workers saw their wages decline in line with inflation which was 7% at last year’s end.
As the economy recovered from its short 2020 recession, stock prices and profits rose sharply, CEO compensation soared. After years of relatively slow growth, CEOs’ pay packages exploded because so much of their compensation is tied to this performance.
Expedia Group’s package valued at $296.2 Million and JPMorgan Chase’s $84.4 Million, were two of the most notable. Boards gave stock options or stock grants to CEOs who recently took over the company’s management during the pandemic. They also granted stock options or stock stock options to existing leaders that they wanted to persuade to stay.
If the company is meeting its performance targets, CEOs may not be able to cash in stock options or stock options for many years. Companies still have to disclose their estimates of how much they are worth. About 25% of the average pay package for S&P 500 CEOs was in cash.
No matter what the composition of the company, the gap in pay between CEOs (and the workers below them) continues to widen. It would take at least 186 years for a worker in the middle of a company’s salary scale to earn the same amount as their CEO. This is despite the fact that half of the companies included in this year’s survey. This is an increase of 166 from last year.
Walmart’s median associate earned $25,335 last year, according to the company. This means that half of Walmart’s workers earned more and half made less.
This is 21% more than $20,942 last year. It also came as the average hourly wage for U.S. employees rose from $14.50 in Jan 2021 to over $17 now. This was a percentage increase that Doug McMillon received, which was more than the CEO’s raise. His 13.7% raise brought him a total package of $25.7 million.
This imbalance is causing anger. According to surveys, Americans of all political parties consider CEO pay too high. Some investors are responding.
Workers across the country are organizing unions. The “Great Resignation,” which has energised millions of people to leave their jobs to seek better ones elsewhere, has encouraged them to do so. In April 2021, the United States government recorded more than 4,000,000 quits. This was the first time this has happened. Since then, the monthly total has surpassed 4.5 million twice.
Sarah Anderson, Director of the global economy project of the progressive Institute for Policy Studies, stated that this would add significant cost to corporate bottom line.
Anderson stated that they should think about the message they are sending to these people and whether they feel valued in their jobs. Anderson said, “When the guy at the corner office makes several hundred to thousands more, that sends a demoralizing message.”
The median increase in CEO pay has slowed in recent years. It fell from 8.5% in 2017 and 4.1% in 2019, with the median rise falling to 4.1%. The median rise in CEO pay was 4.1% in 2019, up from 8.5% in 2017. This was complicated by the pandemic that decimated the economy and many companies lost profits.
Many companies have rearranged the complex formulas that they used to pay their CEOs for 2020. These tweaks compensated for the losses caused by the pandemic which many boards believed was an exceptional event beyond the control of the CEO.
Then came 2021. Stock prices rose thanks to a reopened economy and super-low interest rates by the Federal Reserve and other factors. The S&P 500 increased nearly 27% throughout the year, setting new records. Earnings per share rose by roughly 50%
According to Dan Laddin, a partner in Compensation Advisory Partners (a firm that consults with boards), CEOs had to navigate snarled supply chain and shortages of key materials throughout the year.
Kelly Malafis, a partner at Compensation Advisory Partners said that “all this led to a desire for really rewarding” executives. “Because the financial performance was there and the view was, management teams were exceptional at navigating the situation, and delivering results.”
Equilar data shows that the 17.1% increase in median pay for S&P 500 CEOs last year was the largest since a 23.9% rise for 2010 compensation packages.
Mary Barra is the CEO of General Motors. The shortage of computer chips was particularly difficult for her industry, which in turn slowed auto production.
GM’s board emphasized that the company had still achieved record earnings before interest and taxes. The automaker also increased the development of electric vehicles. These are just two factors that affect Barra’s compensation, which soared 25.4% to $29.1million.
Dave Green, a hot-metal driver at a GM plant in Bedford, Indiana, said, “I would hope the corporation making record profits would acknowledge that the workers are the ones generating revenue.” “We are just trying to survive.”
He mentioned in particular temporary workers earning roughly $16 an hour, who work for years before becoming full-time employees. They don’t have many opportunities to take days off and are forced to work long hours.
Green, who is a summer worker at GM and has two daughters, said, “The new people coming into, their children are not going to get the opportunities my children had.”
Jamie Dimon of JPMorgan Chase, whose $84.4 million compensation package was fifth in the AP survey, was closer to the top of the list for CEO pay. This was an increase of 166.7% over the previous year, with most of the compensation coming from stock options worth $52.6 million.
The board stated that it offered the options to Dimon because he wanted to lead the company for more years, and that there was a unique inflection point in Dimon’s tenure. It also said that the options were not part of Dimon’s regular annual compensation, and that he would have to wait at least five to exercise them.
However, just 31% of JPMorgan Chase’s shareholders gave Dimon’s pay package a thumbs-up at the annual meeting. However, the vote is advisory and does not force JPMorgan Chase to make any changes.
A median of 92.6% shareholders voted in the AP survey for what was called “Say On Pay”. This was a slight decrease from the 93.4% in the previous year.
Equilar and the AP both included data on pay for 340 CEOs of S&P 500 companies that had served at least two fiscal year at their companies. These companies filed proxy statements between January 1 and April 30. Some prominent CEOs, such as Parag Agrawal of Twitter and Andy Jassy from Amazon, aren’t included in the study because they don’t meet the criteria. The totals of compensation do not include changes in CEOs’ pension benefits or other items.
