American CEO’s, the men and women who call the shots at businesses large and small, have reason to smile, at least financially, according to a May 26, 2014 story published by Yahoo News.
Soaring stock prices, greater compensation, valuable stock options, and other incentives have sent the pay of CEO soaring in the past year, pushing the 2013 median pay to $10.5 million, an increase of 8.8 percent from the $9.6 million average CEO pay package in 2012.
The figures are based on large public companies are taken from an Associated Press/Equilar pay study.
Over the past four years, a period of time during which incomes for Americans have been stagnant or barely moving, the average CEO pay has climbed more than 50 percent. According to the Associated Press study, a CEO now earns about 257 times as much as the average worker, compared to 181 times as much in 2009.
Part of the reason for the large bump in pay is the way CEO are compensated. In an effort to appease critics, Boards of Directors have modified compensation packages to include transfers of stock rather than stock options and bonuses. This was intended as a means to tie CEO compensation more closely to his/her company’s financial performance. If the company performs well, the stock rises, and a CEO is rewarded with shares that he/she can then sell in the open market. With the S&P, Dow Jones, and other indices reaching record levels, CEO compensation has been driven sharply higher.
"Companies have been happy with their CEOs' performance and the stock market has provided a big boost," says Gary Hewitt, the director of research at GMI Ratings, a company specializing in corporate governance. "But we are still dealing with a situation where CEO compensation has spun out of control and CEOs are being paid extraordinary levels for their work."
Leading the pack is Anthony Petrello of Nabors Industries, an oilfield services company. Petrello pocketed $68.3 million last year, largely the result of a buyout of his previous contract. Second on the list of 2013’s highly compensated CEO was Leslie Moonves of CBS. Moonves raked in $65.6 million in 2013, a year that witnessed a 70 percent jump in the CBS stock price.
CEO pay is a controversial topic. Critics contend that CEO are paid far too much and that not enough of a company’s financial success is transferred to non- managerial personnel. Big companies often argue that these highly lucrative compensation packages are necessary in order to lure the best talent. Others say that the growth in CEO pay needs to be curbed and that large businesses need to take the lead in making changes that include better pay for ordinary workers.
According to the Bureau of Labor Statistics, the average American worker received only 1.3 percent additional wages in 2013. This lopsided difference in executive compensation vs. everyone else needs to be addressed by Corporate Boards and other decision makers as quickly as possible to diffuse this very divisive topic.