Median pay reached $13.4 million for chief executives of the biggest U.S. companies in 2020, setting a fifth straight annual record in a year when businesses and their leaders battled a global pandemic. Most S&P 500 CEOs got raises of about 5% or more as their companies recorded annual shareholder returns of about 8%, according to a Wall Street Journal analysis of data from MyLogIQ.
HIGHEST-GROSSING FIGURES
Most of the companies led by this year’s top earners aren’t typically in the pay stratosphere. Several reflect the winners of the pandemic and its economic turmoil, including video game maker Activision Blizzard Inc. and biotech giant Regeneron Pharmaceuticals Inc.
Paycom Software Inc. founder Chad Richison, whose pay package was valued at more than $200 million, was the highest-paid CEO in the Journal’s analysis. Paycom said the company must make significant market and operational gains for Mr. Richison to realize most of his pay, and noted he won’t be eligible for further equity grants for five years.
Most CEO compensation packages are predominantly restricted stock or stock options, as boards continue to emphasize pay structures intended to tie executive pay to the fortunes of shareholders generally. As a result, as stock prices rise, pay packages can swell beyond reported figures: General Electric Co. CEO Larry Culp received equity grants in 2020 originally valued at about $57 million that rose to $100 million by year’s end. GE said Mr. Culp won’t receive any of his August stock grant until 2024, and then only if performance targets are met. The first of those targets was met in December and a second one was reached in May.
Activision Blizzard’s lead independent director, Robert Morgado, said Mr. Kotick’s pay was earned over four years and reflects more than 30 years of creating value for shareholders.
Regeneron said CEO Leonard Schleifer’s pay jumped because of a front-loaded equity grant meant to replace five years of awards, signaling the board’s confidence in his leadership, and noted he must hold the resulting shares a further three years.
DaVita Inc., a dialysis company, also said its CEO’s pay was meant to replace five years of equity grants. The company said its board set the equity portion of the pay package amid a major strategic shift, and that a sharp run-up in the company’s share price increased its value before shareholders approved it.
THE LOWEST
Twenty-four S&P 500 CEOs made less than $5 million last year, down from 28 to 33 in recent years. Twitter Inc.’s co-founder Jack Dorsey made $1.40 — a penny for each character in the social-messaging platform’s original 140-character limit — and gas pipeline owner Kinder Morgan Inc.’s Steven Kean made $1.
The lowest-paid of all, at least as far as reported compensation goes, was Tesla Inc.’s Elon Musk, one of the world’s richest executives. He reported zero pay for 2020 — even as he raked in stock options worth $32 billion under his landmark 2018 pay package.
BEST RETURN
All five of the companies producing the best one-year shareholder returns reported CEO pay packages well below the median. Eleven of the 25 best-performing companies were technology firms — 12 if you count Tesla, which is categorized by S&P as an automaker. Four top-performing companies were in healthcare. Total shareholder return reflects change in share price plus dividends.
WORST RETURN
The worst-performing companies of 2020 tended to be in industries hard-hit by the pandemic, such as cruise lines and energy companies. Fifteen of the 25 worst-performing companies were in the energy sector. One — Hewlett Packard Enterprises Co., with a roughly negative 45% one-year return — was in tech.
Norwegian Cruise Line Holdings Ltd. said Frank Del Rio received modified prior-year awards as a result of the cruise industry’s pandemic shutdown and an earlier federal decision to rescind travel to Cuba, as well as one-time payments tied to a new employment agreement.
Occidental Petroleum Corp. said the value Vicki Hollub can ultimately realize was “significantly impacted” by the company’s performance in last year’s pandemic-related economic downturn.
Carnival Corp. said Arnold Donald gave up 45% of his $1.5 million salary during the year and that 90% of his $13.3 million total reported pay reflected pre-pandemic performance for prior years.
WOMEN CEOS
Twenty-two women ran S&P 500 companies for the full year in 2020, remaining near recent lows. Their median pay was in line with the men, at $13.6 million versus $13.4 million.
Lockheed Martin Corp.’s Marillyn Hewson — often among the S&P 500 index’s top-paid women — stepped down during the year, making $28.5 million.
WSJ RANKING OF FULL S&P 500
This sortable table includes compensation figures as reported by S&P 500 companies for CEOs that served in those roles for the full year, along with one year total shareholder returns.
The JobHopin Team
Source: Article written by the Wall Street Journal