Pay for corporate chief executive officers at som eof the biggest companies in the United States rose again last year even as the coronavirus pandemic ravaged the world.
The median pay package for a CEO at an S&P 500 company hit $12.7 million in 2020 — half made more, and half made less. That’s up 5% over median pay for that same group of CEOs in 2019 and an acceleration from the 4.1% climb last year, according to data analyzed by Equilar for The Associated Press.
That’s despite the spread of COVID-19 sending the economy to its worst quarter on record and slashing corporate profits.
Many of these CEOs have understanding corporate boards to thank, boards that gave them a break given that the pandemic was an extraordinary event beyond their control and made changes to the intricate formulas they use to determine CEO pay.
Overall, 61% of the 342 CEOs in this year’s survey saw their compensation rise last year. That’s almost the exact same percentage as the 62% in 2019, when the economy and corporate profits were growing.
At Advance Auto Parts, CEO Tom Greco’s pay for 2020 was in line to take a hit because of pandemic-related costs. Extended sick-pay benefits and expenses for hand sanitizer and other safety equipment totaling $60 million dragged down two key measurements that help set his performance pay.
But his board’s compensation committee saw these costs as extraordinary and unanticipated, so it excluded them from its calculations for his pay. That helped Greco’s total compensation rise 4.7% last year, to $8.1 million.
Carnival, the cruise operator, gave stock grants to executives in part to encourage its leaders to stick with the company as the pandemic forced it to halt sailings and furlough workers. For CEO Arnold Donald’s 2020 compensation, those grants were valued at $5.2 million, though their full value ultimately will depend on how the company performs on carbon reductions and other measures in coming years.
That helped boost Donald’s total compensation by 19%, to $13.3 million for the year, even as Carnival had a $10.2 billion loss for its budget year.
Regular workers also saw gains but not at the same rate as their bosses. And millions of others lost their jobs.
Wages and benefits for all workers outside the government rose just 2.6% last year. That’s according to U.S. government data that ignore the effect of workers shifting among industries — a key distinction because more lower-wage earners lost their jobs as the economy shut down than professionals, who could work from home.
“This should have been a year for shared sacrifice,” said Sarah Anderson, who directs the global economy project at the left-leaning Institute for Policy Studies. “Instead it became a year of shielding CEOs from risk while it was the frontline employees who paid the price.”
The AP’s compensation study included data for CEOs at S&P 500 companies with at least two full fiscal years at their companies, which filed proxy statements between Jan. 1 and April 30. So it doesn’t include some highly paid CEOs. CEO pay sometimes include grants of stock and options they might never ultimately receive unless they hit certain performance targets.
Last year’s 5% gain for median CEO pay masks how much variation in pay there was.
Some companies thrived as a result of the pandemic. For instance, sales boomed for Lowe’s amid a great nesting across the country, and CEO Marvin Ellison’s pay nearly doubled after its stock more than doubled the S&P 500’s total return through its fiscal year.
Other CEOs saw their compensation cut.
Duke Energy’s board reduced CEO Lynn Good’s short-term performance pay after its earnings per share fell short, partly because industrial customers used less power during the pandemic. Good’s pay dipped 2.6% to $14.3 million though earnings ended up within the range Duke forecast for Wall Street early in the year.
CEO pay rose despite several top execs taking high-profile salary cuts during the pandemic. Roughly one of every five CEOs had a smaller salary in 2020 than in 2019.
But salary’s often a minor piece of total CEO compensation, derived from notoriously complex formulas. Boards typically stick with the formulas set for CEO pay early each year. But the global economy’s sudden crash prompted many to reconsider.
Companies have to show how much more their CEO makes than their typical worker. The median in this year’s survey was 172 times — up from 167 times last year. Which means employees must work lifetimes to make what their CEO does in a year.
A bill in Congress proposes to raise taxes on corporations whose CEO makes 50 times or more than their median worker.
At some companies, shareholders are pushing back on compensation packages.