Skip to main content

Median CEO pay crosses $10 million in 2013

By WTOP Staff

KEN SWEET
AP Business Writer

NEW YORK (AP) — They’re the $10 million men and women.

Propelled by a soaring stock market, the median pay package for a CEO rose above eight figures for the first time last year. The head of a typical large public company earned a record $10.5 million, an increase of 8.8 percent from $9.6 million in 2012, according to an Associated Press/Equilar pay study.

Last year was the fourth straight that CEO compensation rose following a decline during the Great Recession. The median CEO pay package climbed more than 50 percent over that stretch. A chief executive now makes about 257 times the average worker’s salary, up sharply from 181 times in 2009.

The best paid CEO last year led an oilfield-services company. The highest paid female CEO was Carol Meyrowitz of discount retail giant TJX, owner of TJ Maxx and Marshall’s. And the head of Monster Beverage got a monster of a raise.

Over the last several years, companies’ boards of directors have tweaked executive compensation to answer critics’ calls for CEO pay to be more attuned to performance. They’ve cut back on stock options and cash bonuses, which were criticized for rewarding executives even when a company did poorly. Boards of directors have placed more emphasis on paying CEOs in stock instead of cash and stock options.

The change became a boon for CEOs last year because of a surge in stocks that drove the Standard & Poor’s 500 index up 30 percent. The stock component of pay packages rose 17 percent to $4.5 million.

“Companies have been happy with their CEOs’ performance and the stock market has provided a big boost,” says Gary Hewitt, director of research at GMI Ratings, a corporate governance research firm. “But we are still dealing with a situation where CEO compensation has spun out of control and CEOs are being paid extraordinary levels for their work.”

The highest paid CEO was Anthony Petrello of oilfield-services company Nabors Industries, who made $68.3 million in 2013. Petrello’s pay ballooned as a result of a $60 million lump sum that the company paid him to buy out his old contract.

Nabors Industries did not respond to calls from The Associated Press seeking comment.

Petrello was one of a handful of chief executives who received a one-time boost in pay because boards of directors decided to re-negotiate CEO contracts under pressure from shareholders. Freeport-McMoRan Copper & Gold CEO Richard Adkerson also received a one-time payment of $36.7 million to renegotiate his contract. His total pay, $55.3 million, made him the third-highest paid CEO last year.

The second-highest paid CEO among companies in the S&P 500 was Leslie Moonves of CBS. Moonves’ total compensation rose 9 percent to $65.6 million in 2013, a year when the company’s stock rose nearly 70 percent.

“CBS’s share appreciation was not only the highest among major media companies, it was near the top of the entire S&P 500,” CBS said in a statement. “Mr. Moonves’ compensation is reflective of his continued strong leadership.”

Media industry CEOs were, once again, paid handsomely. Viacom’s Philippe Dauman made $37.2 million while Walt Disney’s Robert Iger made $34.3 million. Time Warner CEO Jeffrey Bewkes earned $32.5 million.

The industry with the biggest pay bump was banking. The median pay of a Wall Street CEO rose by 22 percent last year, on top of a 22 percent increase the year before. BlackRock chief Larry Fink made the most, $22.9 million. Kenneth Chenault of American Express ranked second with earnings of $21.7 million.

Like stock compensation, performance cash bonuses jumped last year as a result of the surging stock market and higher corporate profits. Earnings per share of the S&P 500 rose 5.3 percent in 2013, according to FactSet. That resulted in an average cash bonus of $1.9 million, a jump of 12.9 percent from the prior year.

More than two-thirds of CEOs at S&P 500 companies received a raise last year, according to the AP/Equilar study, because of the bigger profits and higher stock prices.

CEO pay remains a divisive issue in the U.S. Large investors and boards of directors argue that they need to offer big pay packages to attract talented men and women who can run multibillion-dollar businesses.

“If you have a good CEO at a company, the wealth he might generate for shareholders could be in the billions,” says Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank. “It might be worth paying these guys millions for doing this type of work.”

CEOs are still getting much bigger raises than the average U.S. worker.

The 8.8 percent increase in total pay that CEOs got last year dwarfed the average raise U.S. workers received. The Bureau of Labor Statistics said average weekly wages for U.S. workers rose 1.3 percent in 2013. At that rate an employee would have to work 257 years to make what a typical S&P 500 CEO makes in a year.

“There’s this unbalanced approach, where there’s all this energy put into how to reward executives, but little energy being put into ensuring the rest of the workforce is engaged, productive and paid appropriately,” says Richard Clayton, research director at Change to Win Investment Group, which works with labor union-affiliated pension funds.

Investors have become increasingly vocal about executive pay since the recession. This has led to an increasing number of public spats between boards of directors, who propose pay packages, and shareholders, who own the company. These fights become public during “say on pay” votes, when shareholders have an opportunity to show they approve or don’t approve of pay packages. Votes are non-binding, but companies sometimes act when there is clear disapproval from shareholders.

Petrello was the best-paid CEO largely because the board of directors of Nabors Industries’ wanted to end his previous contract. Under that contract, Petrello could have been owed huge cash bonuses, and the company could have paid out tens of millions of dollars if he were to die or become disabled. The board changed his contract following “say on pay” votes in 2012 and 2013 that showed shareholders were unhappy with how Nabors paid its executives.

There have been other signs of shareholder concern about CEO pay. This month, 75 percent of Chipotle Mexican Grill shareholders voted against a proposed pay package for co-CEOs Steve Ells and Montgomery Moran. Ells earned $25.1 million in 2013 while Moran earned $24.3 million, a 27 percent rise in compensation for each. Chipotle spent $49.5 million on CEO pay last year, the fourth highest in the S&P 500.

“Companies are now taking the time to think through their pay practices and are talking more with shareholders,” says Hewitt of GMI Ratings. “There’s still a long way to go but pay practices are getting better.”

To calculate a CEO’s pay package, the AP and Equilar looked at salary as well as perks, bonuses and stock and option awards, using the regulatory filings that companies file each year. Equilar looked at data from 337 companies that had filed their proxies by April 30. It includes CEOs who have been at the company for two years.

One prominent name not included in the data was Oracle CEO Larry Ellison, who is typically one of the best paid CEOs in the country.

Oracle files its salary paperwork later in the year, so Ellison was excluded in the 2013 survey data. He was awarded $76.9 million in stock options for Oracle’s fiscal year ending May 2013, according to proxy filings.

Among other findings:

— Female CEOs had a median pay package worth more than their male counterparts, $11.7 million versus $10.5 million for males. However, there were only 12 female CEOs in the AP/Equilar study compared with 325 male CEOs that were polled.

— The CEO who got the biggest bump in compensation from 2012 to 2013 was Rodney Sacks, the CEO of Monster Beverage. Sacks earned $6.22 million last year, an increase of 679 percent. Monster’s board of directors awarded Sacks $5.3 million in stock options to supplement his $550,000 salary and $300,000 cash bonus.

____

Follow Ken Sweet on Twitter @kensweet

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote