CEO pay increased 17% in 2021 as profits soared; dragged workers

NEW YORK — Even as regular workers get their biggest raises in decades, they pale in comparison to what CEOs get.

The typical compensation package for CEOs who run SThe &P 500 companies soared 17.1% last year, to a median of $14.5 million, according to data analyzed for The Associated Press by Equilar.

The gain tops the 4.4% rise in private-sector workers’ wages and net benefits through 2021, which was the fastest on record since 2001. The raises for many rank-and-file workers also failed to keep up with inflation, which reached 7% at the end of last year.

CEO pay took off as stock prices and profits rebounded sharply as the economy emerged from its brief 2020 recession. Because much of a CEO’s compensation is tied to said performance, their salary packages soared after years of mostly moderate growth.

In many of the more high-profile packages, such as Expedia Group’s valued at $296.2 million and JPMorgan Chase’s $84.4 million, the boards awarded particularly large grants of stock or stock options to newly appointed chief executives who they navigate their companies through the pandemic or the established leaders they wanted to convince to hang around.

CEOs are often unable to cash in on such shares or options for years, if not ever, unless the company meets performance targets. But companies have yet to disclose estimates of how much they are worth. Only about a quarter of the typical payment package for all S&P 500 CEOs last year came as real cash they could pocket.

Whatever their makeup, the pay gap between CEOs and the rank-and-file workers they oversee continues to widen. At half of the companies in this year’s pay survey, it would take at least 186 years for the worker in the middle of the company’s pay scale to do what their CEO did last year. That’s an increase from 166 a year earlier.

At Walmart, for example, the company said its average associate earned $25,335 in compensation last year. That means that half of their workers earned more and the other half earned less.

That’s up 21% from $20,942 a year earlier and came as the company’s average hourly wage for U.S. associates increased from $14.50 in January 2021 to more than $17 today. That raise was larger than what CEO Doug McMillon got, in percentage terms. But his 13.7% increase netted him a total package valued at $25.7 million.

Anger is growing at such an imbalance. Polls suggest that Americans of all political parties consider CEO pay too high, and some investors are backing off.

Workers are trying to organize unions across the country, and the “Great Resignation” has encouraged millions to quit to find better jobs elsewhere. The US government counted more than 4 million resignations during April 2021 alone, the first time that has happened. Since then, the monthly number has exceeded 4.5 million twice.

“That’s going to add a huge cost to corporate bottom lines, to have these kinds of turnover rates,” said Sarah Anderson, director of the global economics project at the progressive Institute for Policy Studies.

“They should be thinking about what kind of message are they sending to those people, if they are really valued in their jobs,” Anderson said. moreover, that is sending a really demoralizing message.”

Earnings for CEO pay have slowed in recent years, with the average increase declining from 8.5% in 2017 to 4.1% in 2019. It rose again to 5% in 2020, which was a Complicated year because the pandemic paralyzed the economy and profits in many companies collapsed.

For 2020, many companies have reworked the intricate formulas they created to determine the salary of their CEOs. The adjustments offset losses caused by the pandemic, something many boards said was an extraordinary event outside the CEO’s control.

Then came 2021. Thanks to a reopened economy, super-low interest rates from the Federal Reserve, and other factors, stock prices soared and the S&P 500 jumped nearly 27%, setting records for the year. Earnings per share soared about 50%.

Throughout the year, CEOs had to navigate tangled supply chains and shortages of chips and other key materials that hit companies across industries, said Dan Laddin, a partner at Compensation Advisory Partners, a consulting firm that works with joints.

“All of this led to a desire to really reward” executives, said Kelly Malafis, also a partner at Compensation Advisory Partners, “because the financial performance was there and the view was that the management teams were exceptional at handling the situation and delivering results. . ”

The 17.1% jump from last year for the median salary of S&P 500 CEOs was the biggest since a 23.9% increase in compensation packages in 2010, according to data analyzed by Equilar.

Consider Mary Barra, CEO of General Motors. The car industry was hit particularly hard by a shortage of computer chips, which hampered car production.

Still, GM’s board of directors highlighted how the company still delivered record earnings before interest, taxes and a few other items. The automaker also accelerated the development of its electric vehicles. Those are two of the factors that influence Barra’s pay, and his compensation is up 25.4% to $29.1 million.

“I hope that the corporation that makes record profits recognizes that the workers who do the work are the ones who generate the revenue,” said Dave Green, a hot metal driver at a GM plant in Bedford, Indiana. “We’re just trying to get by.”

He cited in particular temporary workers who make about $16 an hour, who have to work for years before becoming full-time employees and don’t have many opportunities for days off in the meantime.

“New people coming in, their kids are not going to be able to have the opportunities that my kids had,” said Green, who has two daughters and started at GM as a summer helper in 1989.

Closer to the top of the CEO pay ranking last year was JPMorgan Chase’s Jamie Dimon, whose compensation package valued at $84.4 million was the fifth-highest in the AP survey. That was 166.7% more than a year earlier, with most of it coming from a stock option award valued at $52.6 million.

The board said it provided the options because of its desire to see Dimon, 66, continue to lead the company for many more years and a “unique turning point in Mr. Dimon’s tenure.” He also said that the options were not part of his regular annual compensation and that he must wait at least five years to start exercising them.

Still, only 31% of investors at JPMorgan Chase’s annual shareholder meeting recently approved of Dimon’s pay package. However, the vote is advisory only and does not obligate the company to make any changes.

Last year, a median 92.6% of shareholders approved what is called their “Say On Pay” vote in the AP poll. That was only slightly less than the previous year’s 93.4%.

The AP and Equilar compensation study included pay data for 340 CEOs at S&P 500 companies that have worked at least two fiscal years in their companies, who filed proxy statements between January 1 and April 30. Some high-profile CEOs aren’t included because they don’t meet the criteria, like Amazon’s Andy Jassy and Twitter’s Parag Agrawal. The survey does not count changes in the value of CEOs’ pension benefits and some other items in their compensation totals.

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AP business writers Matt Ott, Tom Krisher, Anne D’Innocenzio, Michael Liedtke and Ken Sweet contributed.

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