CEOs of large companies more than double gains of small and mid caps, GMI study shows
Chief executive compensation at North America’s large public companies rose faster last year than that of counterparts in medium and small companies, according to a study by GMI Ratings.
Average CEO compensation last year increased by 8.47 percent on the median, while gains in total realized compensation for chief executives of companies on the S&P 500 rose 19.7 percent, the study shows. It also reveals that compensation for chief executives of companies on the Russell 1000 rose 15.7 percent, double the median 7.6 percent gain for heads of Russell 2000 members.
The study of 2,259 CEOs who have been in their positions for at least two straight years shows that most of the increase came from exercising stock options and the vesting of restricted stock. Base salary for S&P 500 CEOs rose only 2 percent while it increased 2.8 percent at mid caps and 2.9 percent at small caps.
‘While stock options are intended to align the interests of senior executives with shareholders, the unintended consequence of these grants is often windfall profits that come from small share price increases,’ the study authors write. ‘With option grants numbering in the hundreds of thousands or even millions, CEOs at large companies in particular are able to profit by the millions for any positive gain over the strike price of their options.’
GMI says its list of the top 10 CEOs in terms of pay set several records in 2012, including by having two CEOs who earned more than $1 bn. The combined total of the top 10 CEOs also reached a record high of $4.7 bn, and 2012 marked the first time all members of the list earned more than $100 mn. Facebook CEO Mark Zuckerberg earned $2.28 bn and Kinder Morgan CEO Richard Kinder, who had a base salary of just $1, earned a total of $1.12 bn.
Construction materials was the industry with the highest median gains as total compensation realized increased by 91 percent on average. Office electronics was next, with an 89.9 percent increased, followed by the 72 percent increase seen by CEOs of personal products companies.
The auto components sector placed at the bottom of the list, with an average drop of 14 percent. CEOs in the semiconductor and semiconductor equipment sector lost at average of 6 percent of their pay while compensation at independent power producers and energy traders declined 2.7 percent.
