CEO Pay Hits New Low With Smallest Pay Increase in Five Years According to Korn Ferry Hay Group Study
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2015 median CEO compensation increases and values (Graphic: Business Wire)
Overall, total direct compensation for the 300 CEOs at the largest firms
last year to file their proxy between
The smallest increase in the past 5 years in CEO total direct compensation (2.7 percent) corresponds to the first decrease in total shareholder returns (TSR) in five years with a negative TSR of -0.3 percent compared to a 17.5 percent return in 2014. Total revenue was also down -0.4 percent and net income growth among the companies was only 1.8 percent, compared to last year’s growth of 7.1 percent.
“When companies were seeing double digit returns, boards and shareholders were much more likely to approve higher CEO compensation packages,” said
Irv Becker, North America Leader for Korn Ferry Hay Group’s Executive Pay and Governance practice. “But with today’s uncertain market and slower growth rates, compensation committees and shareholders will put CEO pay under a much more intense spotlight.”
Performance-based LTIs reached their highest level ever in this year’s study, accounting for 33 percent of CEO pay packages in 2015, which overall is up from 25 percent in 2011. Bonuses were the second-heaviest weighted component of pay, making up 21 percent of the median CEO’s total direct compensation.
“Based on the current environment, we continue to see a shift to performance-based and long-term compensation packages for U.S. CEOs,” said Becker. “With this being the lowest total shareholder return since the beginning of the ‘say on pay’ era and active shareholders pushing for more performance-linked pay, it’s no surprise that we continue to see the use of more performance-based equity awards in our study this year, a trend that we expect to continue.”
The 2015 study focused on the primary elements of compensation for CEOs
of the 300 largest public companies by revenue to file their final
definitive proxy statements between
*Note: All dollar figures are medians and are calculated independently. Medians should not be added to create another data point.