Typical CEO made $9.6 million last year
The head of a typical public company made $9.6 million in 2011, according to an analysis by The Associated Press. The typical American worker would have to labor for 244 years to make what the typical boss of a big public company makes in one.
Profits at big U.S. companies broke records last year, and so did pay for CEOs.Skip to next paragraph
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That was up more than 6 percent from the previous year, and is the second year in a row of increases. The figure is also the highest since the AP began tracking executive compensation in 2006.
Companies trimmed cash bonuses but handed out more in stock awards. For shareholder activists who have long decried CEO pay as exorbitant, that was a victory of sorts.
That's because the stock awards are being tied more often to company performance. In those instances, CEOs can't cash in the shares right away: They have to meet goals first, like boosting profit to a certain level.
The idea is to motivate CEOs to make sure a company does well and to tie their fortunes to the company's for the long term. For too long, activists say, CEOs have been richly rewarded no matter how a company has fared – "pay for pulse," as some critics call it.
To be sure, the companies' motives are pragmatic. The corporate world is under a brighter, more uncomfortable spotlight than it was a few years ago, before the financial crisis struck in the fall of 2008.
Last year, a law gave shareholders the right to vote on whether they approve of the CEO's pay. The vote is nonbinding, but companies are keen to avoid an embarrassing "no."
In the past year, he says, "Shareholders found their voice."
The typical CEO got stock awards worth $3.6 million in 2011, up 11 percent from the year before. Cash bonuses fell about 7 percent, to $2 million.
The value of stock options, as determined by the company, climbed 6 percent to a median $1.7 million. Options usually give the CEO the right to buy shares in the future at the price they're trading at when the options are granted, so they're worth something only if the shares go up.
Profit at companies in the Standard & Poor's 500 stock index rose 16 percent last year, remarkable in an economy that grew more slowly than expected.
CEOs managed to sell more, and squeeze more profit from each sale, despite problems ranging from a downgrade of the U.S. credit rating to an economic slowdown in China and Europe's never-ending debt crisis.
Still, there wasn't much immediate benefit for the shareholders. The S&P 500 ended the year unchanged from where it started. Including dividends, the index returned a slender 2 percent.
Shareholder activists, while glad that companies are moving a bigger portion of CEO pay into stock awards, caution that the rearranging isn't a cure-all.
For one thing, companies don't have to tie stock awards to performance. Instead, they can make the awards automatically payable on a certain date – meaning all the CEO has to do is stick around.