Human Capital & Careers

CEO Pay Rose by 6% in 2016

It was the biggest gain in compensation for chief executives in three years, Equilar reports.
William SprouseJune 21, 2017

The median total compensation of 500 large-cap company CEOs grew 6.1% in the 2016 fiscal year, according to a new report from Equilar. It was the highest growth rate since pay packages increased 8% in 2013.

The Equilar CEO Pay Trends report looked at total compensation for chief executives as shown in proxy-disclosed summary compensation tables. Median salary grew less than 1% in 2016, while annual bonuses grew about 5%.

The biggest portion of the gain in total compensation was attributable to grants of restricted stock, which have shot up 43.5% since 2012.

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“At a broad level, the value of CEO pay packages consistently climbed each year over the five-year study period examined for this report,” Equilar wrote. “The distribution of pay components, meanwhile, continued to shift away from discretionary bonuses and stock options and toward plan-based performance bonuses and stock-based performance incentives.”

The median CEO in the study was awarded $11 million in 2016. Compensation was nearly $8 million and $15 million at the 25th and 75th percentiles, respectively. Health care was the sector with the highest CEO pay, a median of $14.2 million, while financial services and utilities reported the lowest, both at $9.7 million.

Equilar said institutional investors have been growing “increasingly self-reliant and active,” prompting boards to “tweak” incentive pay. Regulations requiring nonbinding “say-on-pay” advisory votes by shareholders were introduced in 2011, a bid to align compensation more closely with company performance and shareholder interest.

Equilar said support for pay packages as reflected in say-on-pay votes has been consistently high, and CEO pay has increased each year since the rules took effect.

The report found performance-based, long-term incentives were granted to nearly 82% of CEOs in the study, making them the most prevalent LTI award.