Preliminary data show CEO pay jumped nearly 16% in 2020, while average worker compensation rose 1.8%
Data from large firms filing information on CEO compensation through the end of April show corporations and a strong stock market shielded CEOs from the financial impact of the pandemic.
An examination of the early filings of 281 large firms shows:
- The offer by CEOs to forgo salary increases during the pandemic was largely symbolic. Salaries were stable, but many CEOs pocketed a windfall by cashing in stock options and obtaining vested stock awards, compounding income inequalities laid bare during the past year.
- CEO compensation, including realized stock options and vested stock awards, rose 15.9% from 2019 to 2020 among early reporting firms. Growth in CEO compensation was slightly faster than last year’s strong growth—14.0% between 2018 and 2019—while the annual compensation of the average worker increased just 1.8% in 2020.
- Strong CEO compensation growth and modest growth in worker annual compensation yielded a remarkable growth in the CEO-to-worker compensation ratio, which jumped from 276.2 in 2019 to 307.3 in 2020 among early-reporting firms. In firms that retained the same CEO, the CEO-to-worker compensation ratio rose to 341.6 in 2020, up from 278.9 in 2019.
The Institute for Policy Studies also looked at a more limited sample of early-reporting firms (the 100 S&P 500 firms with the lowest median worker pay) and found CEO compensation grew by 15%.
Given that stock-related components of CEO compensation make up roughly three-fourths of total CEO compensation (see Table 1 of Mishel and Kandra 2020), this growth in CEO compensation might be expected given the rapid growth of stocks since the end of 2019 (see Figure A, showing 16.3% growth of S&P 500 from December 2019 to December 2020). The growth of CEO compensation was very uneven across firms, as we show below.
Growth in stock market: Monthly average of S&P 500, January 2017—December 2020
| DATE | SP500 |
|---|---|
| 2017-01-01 | 2275 |
| 2017-02-01 | 2330 |
| 2017-03-01 | 2367 |
| 2017-04-01 | 2359 |
| 2017-05-01 | 2395 |
| 2017-06-01 | 2434 |
| 2017-07-01 | 2454 |
| 2017-08-01 | 2456 |
| 2017-09-01 | 2493 |
| 2017-10-01 | 2557 |
| 2017-11-01 | 2594 |
| 2017-12-01 | 2664 |
| 2018-01-01 | 2790 |
| 2018-02-01 | 2705 |
| 2018-03-01 | 2703 |
| 2018-04-01 | 2654 |
| 2018-05-01 | 2701 |
| 2018-06-01 | 2754 |
| 2018-07-01 | 2794 |
| 2018-08-01 | 2858 |
| 2018-09-01 | 2902 |
| 2018-10-01 | 2785 |
| 2018-11-01 | 2723 |
| 2018-12-01 | 2567 |
| 2019-01-01 | 2607 |
| 2019-02-01 | 2755 |
| 2019-03-01 | 2804 |
| 2019-04-01 | 2904 |
| 2019-05-01 | 2855 |
| 2019-06-01 | 2890 |
| 2019-07-01 | 2996 |
| 2019-08-01 | 2897 |
| 2019-09-01 | 2982 |
| 2019-10-01 | 2978 |
| 2019-11-01 | 3105 |
| 2019-12-01 | 3177 |
| 2020-01-01 | 3278 |
| 2020-02-01 | 3277 |
| 2020-03-01 | 2652 |
| 2020-04-01 | 2762 |
| 2020-05-01 | 2920 |
| 2020-06-01 | 3105 |
| 2020-07-01 | 3208 |
| 2020-08-01 | 3392 |
| 2020-09-01 | 3366 |
| 2020-10-01 | 3419 |
| 2020-11-01 | 3549 |
| 2020-12-01 | 3695 |
Source: S&P Dow Jones Indices LLC, S&P 500 [SP500], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/SP500, May 12, 2021.
Our regular annual report on CEO compensation trends presents data on the 350 largest firms that report by the end of June each year. This post provides an early look at 2020 CEO compensation trends by examining the pay packages of firms that are early reporters—the 281 large firms in our sample from last year’s report that have already reported (by the end of April 2021) on CEO compensation for 2020. We also examine the subset of 239 firms among these early-reporting firms that had the same CEO in both years.
We report two measures of CEO compensation. The first is “realized direct compensation,” a measure incorporating salary, bonus, long-term incentive payouts, stock options exercised, and vested stock awards. We also report on a “granted compensation” measure of CEO compensation that has the same components, except that the stock-related items (stock options and stock awards) are valued when granted rather than when exercised or vested. Further technical details about our data and definitions are available in Mishel and Kandra 2020.
Table 1 provides our analysis. Realized compensation rose $2.9 million (up 15.9%), from $18.5 million to $21.4 million, at the 281 early-reporting firms. The increase was substantially larger among firms where the CEO remained in place: Realized compensation rose $5.3 million (up 28.7%), from $18.5 million to $23.8 million.
Average and median growth of CEO compensation and salary, all firms and firms with remaining CEO, 2019–2020
| Thousands (2020$) | Change (2019–2020) | |||
|---|---|---|---|---|
| 2019 | 2020 | $ (thousands) | % | |
| All early-reporting firms (281) | ||||
| Salary | $1,280 | $1,213 | -$67 | -5.2% |
| Realized compensation | $18,469 | $21,413 | $2,945 | 15.9% |
| Granted compensation | $13,167 | $13,008 | -$159 | -1.2% |
| Early-reporting firms with same CEO (239) | ||||
| Salary | $1,257 | $1,216 | -$41 | -3.2% |
| Realized compensation | $18,495 | $23,795 | $5,300 | 28.7% |
| Granted compensation | $13,166 | $13,197 | $32 | 0.2% |
| Median growth in realized compensation* | ||||
| All | $101 | $100 | -$1 | -1.0% |
| Same CEO | $6,023 | $6,337 | $314 | 5.2% |
Notes: Sample is firms in the top 350 U.S. firms ranked by sales (as of June 2020 Compustat sample) who have reported by end of April 2021. Average annual compensation is measured in two ways. Both include salary, bonus, and long-term incentive payouts, but the “granted” measure includes the value of stock options and stock awards when they are grants, whereas the “realized” measure captures the value of stock-related components that accrues after options or stock awards are granted by including “stock options exercised” and “vested stock awards.”
* Calculated as median of firms ranked by percent growth of realized compensation.
Source: Authors’ analysis of data from Compustat’s ExecuComp database.
These large increases in CEO compensation occurred even though CEO salaries were stable (many CEOs offered to not take salary increases, something entirely symbolic given the growth of the other components of compensation). An assessment of the individual components of compensation show that CEO compensation increases were driven entirely by the huge increase in the value of exercised stock options and vested stock awards in 2020, presumably to take advantage of the high stock prices. Realized stock options for CEOs that stayed in place rose by 81%, up $3.6 million, and accounted for 68% of the total rise in realized compensation. Vested stock awards grew by 1.9 million and accounted for 36% of the rise in realized compensation. Bonuses, salaries, and long-term incentives actually fell.
While growth in CEO compensation was faster than last year’s growth (14.0% between 2018 and 2019), the annual compensation of the average worker (which is a proxy measure for the pay of typical workers within these firms, as detailed in Mishel and Kandra 2020) increased just 1.8% in 2020. The lack of growth in worker compensation and the immense growth in CEO compensation yielded a remarkable growth in the CEO-to-worker compensation ratio, which jumped from 276.2 in 2019 to 307.3 in 2020 among early-reporting firms (Table 2). In firms that retained the same CEO, the CEO-to-worker compensation ratio rose to 341.6 in 2020, up from 278.9 in 2019.
CEO-to-worker ratio for all firms and for firms with same CEO, 2019–2020
| CEO-to-worker ratio | |||
|---|---|---|---|
| 2019 | 2020 | Differential | |
| All early-reporting firms (281) | |||
| Realized compensation | 276.2 | 307.3 | 31.1 |
| Granted compensation | 202.0 | 197.9 | -4.0 |
| Early-reporting firms with same CEO (239) | |||
| Realized compensation | 278.9 | 341.6 | 62.7 |
| Granted compensation | 202.2 | 199.7 | -2.5 |
Notes: Sample is firms in the top 350 U.S. firms ranked by sales (as of June 2020 Compustat sample) who have reported by end of April 2021. Average annual compensation is measured in two ways. Both include salary, bonus, and long-term incentive payouts, but the “granted” measure includes the value of stock options and stock awards when they are grants, whereas the “realized” measure captures the value of stock-related components that accrues after options or stock awards are granted by including “stock options exercised” and “vested stock awards.”
Source: Authors’ analysis of data from Compustat’s ExecuComp database.
The growth of CEO compensation was far from uniform. As Table 1 shows, the median CEO (who had realized compensation growth that was more than half the other CEOs but also less than half the other CEOs) across all firms saw stable compensation growth, far less than the average increase of 15.9%. Similarly, the median growth of realized compensation among early-reporting firms that retained their CEO was 5.2% (rising $314,000), far less than the 28.7% increase on average.
This pattern of CEO compensation growth reflects the wide array of increases with the CEOs of some firms enjoying multiple-hundred-percent compensation growth while others had much smaller increases (see Figure B). For instance, six CEOs had compensation rise more than 500%, another 10 CEOs had compensation grow between 200% and 345%, and an additional 29 other CEOs saw their compensation more than double. At the same time, roughly half (143) of the 281 early-reporting firms provided lower realized CEO compensation in 2020 than in 2019, including 111 of 239 firms who retained their CEO. Our analysis showed no relationship between changes in CEO realized compensation and the growth of the specific firm’s stock price (from the end of 2019 to the end of 2020).
Growth in CEO pay is uneven across firms: Distribution of realized compensation percent change, 2019–2020
| Realized compensation percent change (2019–2020) | Frequency | Density |
|---|---|---|
| -100% | 2 | 0.15 |
| -95% | 5 | 0.38 |
| -90% | 4 | 0.31 |
| -85% | 3 | 0.23 |
| -80% | 1 | 0.08 |
| -75% | 6 | 0.46 |
| -70% | 6 | 0.46 |
| -65% | 5 | 0.38 |
| -60% | 5 | 0.38 |
| -55% | 1 | 0.08 |
| -50% | 9 | 0.69 |
| -45% | 14 | 1.07 |
| -40% | 4 | 0.31 |
| -35% | 10 | 0.76 |
| -30% | 13 | 0.99 |
| -25% | 10 | 0.76 |
| -20% | 10 | 0.76 |
| -15% | 12 | 0.92 |
| -10% | 10 | 0.76 |
| -5% | 13 | 0.99 |
| 0% | 7 | 0.53 |
| 5% | 14 | 1.07 |
| 10% | 8 | 0.61 |
| 15% | 8 | 0.61 |
| 20% | 6 | 0.46 |
| 25% | 4 | 0.31 |
| 30% | 6 | 0.46 |
| 35% | 5 | 0.38 |
| 40% | 6 | 0.46 |
| 45% | 7 | 0.53 |
| 50% | 2 | 0.15 |
| 55% | 4 | 0.31 |
| 60% | 6 | 0.46 |
| 65% | 5 | 0.38 |
| 70% | 0 | 0.00 |
| 75% | 0 | 0.00 |
| 80% | 1 | 0.08 |
| 85% | 1 | 0.08 |
| 90% | 1 | 0.08 |
| 95% | 0 | 0.00 |
| 100% | 3 | 0.23 |
| 105% | 2 | 0.15 |
| 110% | 0 | 0.00 |
| 115% | 5 | 0.38 |
| 120% | 1 | 0.08 |
| 125% | 1 | 0.08 |
| 130% | 2 | 0.15 |
| 135% | 5 | 0.38 |
| 140% | 1 | 0.08 |
| 145% | 1 | 0.08 |
| 150% | 1 | 0.08 |
| 155% | 1 | 0.08 |
| 160% | 1 | 0.08 |
| 165% | 0 | 0.00 |
| 170% | 0 | 0.00 |
| 175% | 0 | 0.00 |
| 180% | 0 | 0.00 |
| 185% | 2 | 0.15 |
| 190% | 1 | 0.08 |
| 195% | 1 | 0.08 |
| 200% | 0 | 0.00 |
Note: Observations with greater than 200% growth were omitted.
Source: Authors’ analysis of data from Compustat’s ExecuComp database.
This analysis of CEO compensation indicates that the stock market’s growth in 2020 has contributed to a major leap forward in CEO compensation, compounding the income and wealth inequalities that have emerged in the pandemic. There are also examples of firms making “discretionary adjustments” to their compensation schemes to shield CEOs from “the pandemic’s adverse impact on the company’s financial results.” Such adjustments, of course, were not made for rank-and-file workers.
The Institute for Policy Studies report shows that 51 of the 100 S&P firms with the lowest median pay “bent their own rules to pump up executive paychecks” and “provided a 29% boost to executive pay, far more than the other firms.” The impact of these adjustments on the growth of CEO compensation will be fruitful to analyze as more data emerge. Our regular report on CEO compensation of the 350 largest firms will be available in July.
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