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Apr 26, 2023

CEO pay at large-cap companies grows 3.1 percent despite turbulent year

ISS Corporate Solutions examines proxy statements of 337 firms

Pay increases for CEOs at large-cap companies grew at a slower rate of 3.1 percent between the 2022 and 2023 proxy filing periods, compared with growth of 13.2 percent the previous year, according to ISS Corporate Solutions.

The solutions provider, which examined 337 large-cap company proxy statements between October 1, 2022 and April 18, 2023, finds median pay for CEOs at S&P 500 companies stood at $14.3 mn over the period.

Bonus and annual incentive payouts during the recorded year fell by 5.4 percent to a combined median of $2.59 mn.

But stock awards for CEOs increased by 9.5 percent to $8.5 mn, while the median option award rose by 8.3 percent to $3 mn during the recorded year.

Thinking about how the data can be useful for IROs, Roy Saliba, managing director at ISS Corporate Solutions, tells IR Magazine: ‘It points back to the importance of proxy disclosures, engagement with investors and telling the company’s story. As an IRO, you really have to be able to engage with investors and explain the rationale for some of these decisions.’

For examined companies where pay increased, the analysis finds the change in median pay was 11.5 percent overall, while the total shareholder return (TSR) declined by 8.4 percent.

Where pay decreased for CEOs, the change averaged 12.8 percent overall with the median one-year TSR dropping by 12 percent.

Data by sector

CEO pay at large-cap companies grows 3.1 percent despite turbulent year
Roy Saliba, ISS Corporate Solutions

Broken down by industry, the analysis finds pay increases for CEOs at 16 out of 25 industries, with companies in the energy sector performing best over the period.

CEOs in the energy sector displayed a median one-year TSR of 71.4 percent with a minor decrease in CEO pay of 0.8 percent.

Companies in the worst-performing industries – such as automobiles and components – saw a median one-year TSR decline of 42.9 percent and a median increase in CEO pay of 1.5 percent.

ESG metrics

According to the latest IR Magazine Executive Compensation report, nearly three quarters of investors expect executive compensation to be linked to ESG metrics. Globally, 46 percent of boards link executive compensation to ESG metrics.

Between one in four and one in five investors globally have supported an activist campaign on executive compensation.

ESG is less of an issue in determining executive pay in North America than in Europe or Asia. Just over a quarter of North American boards link executive compensation to ESG metrics, compared with more than half in Asia and just under two thirds of European boards.

The relevance of ESG to executive pay increases with company size: just over a third of small and mid-cap boards link executive compensation to ESG metrics. This rises to more than two thirds of boards at mega-cap companies.

‘We see more companies changing or moving from incorporating the metrics, just in general, to focusing on two or three key ESG metrics for their business,’ says Saliba.

‘This is encouraging, especially given some of the backlash around ESG in general. Many companies are recognizing the importance of these topics and the importance of aligning their business strategies in the long term around these key areas, and are continuing to move it forward.’