Executives were showered with more pay of all types salaries, bonuses,
stock, options and perks. The biggest gains came in cash bonuses: Two-thirds
of executives got a bigger one than they had in 2009, some more than three
times as big.
CEOs were rewarded because corporate profits soared in 2010 as the economy
gradually got stronger and companies continued to cut costs. Profit for the
companies in the AP analysis rose 41 percent last year.
The stock market also continued its climb. Stocks rose 13 percent in 2010
and have now almost doubled since March 2009. The market's two-year run has
fattened executive bonuses because some CEOs are rewarded for how the
company's stock does.
Separately, the bull market has left CEOs enormous paper gains on stock and
options they were granted as part of pay packages in 2009 and 2010. They are
already worth $6.3 billion, 68 percent more than the companies thought they
would be worth over the lifetime of the grants.
The AP used the Equilar data to analyze CEO pay packages at 334 companies in
the S&P 500 that had filed statements with federal regulators through April
29. Pay was analyzed at companies that had the same CEO in both 2009 and
2010. The AP's analysis is the most comprehensive of 2010 compensation.
Among the other findings in the AP analysis:
The highest-paid CEO in 2010 was Philippe Dauman of Viacom, the
entertainment company that owns MTV, Nickelodeon and Paramount Pictures. He
received a pay package valued at $84.5 million, two and a half times what he
made the year before. He signed a contract in April 2010 that included stock
and options valued by the company at $54.2 million when they were granted.
Six of the 10 best-paid CEOs come from media or entertainment, industries
helped by a recovery in advertising and innovations in digital distribution.
Besides Dauman, they are Leslie Moonves of CBS, $56.9 million; David Zaslav
of Discovery Communications, $42.6 million; Brian Roberts of Comcast, $31.1
million; Robert Iger of Walt Disney, $28 million; and Jeff Bewkes of Time
Warner, $26.1 million.
The 10 highest-paid CEOs made $440 million in 2010, a third more than the
top 10 made in 2009. Four CEOs Dauman, Moonves, Roberts and Ray Irani of
Occidental Petroleum were on the Top 10 list both years.
To calculate CEO pay, the AP adds an executive's salary, bonuses, perks, any
interest on deferred pay that's above market interest rates, and the value a
company places on stock and stock options awarded during the year.
The median pay value of $9 million, calculated by Equilar, is the midpoint
of the companies used in the AP analysis; half of the CEOs made more and
half made less. In 2007, the median pay was $8.4 million. In 2008 it was
$7.6 million, and in 2009 it was $7.2 million. The $9 million median for
2010 is the highest since the AP began the analysis in 2006.
The economy gradually improved in 2010, the first full year of recovery
after the Great Recession. The private sector added 1.2 million jobs after
losing 5 million in 2009. The unemployment rate fell from 9.9 percent to 9.4
For companies that the AP analyzed, revenue grew about 12 percent, according
to data provider CapitalIQ. That helped lift earnings, as did companies'
ability to hold down costs. Companies could limit raises for rank-and-file
workers because of the weak labor market.
The bigger profits helped push up the typical cash bonus given to a CEO by
39 percent in 2010, to $2 million, according to Equilar. Some companies,
including Ford and JPMorgan Chase, didn't grant bonuses in 2009 but paid big
sums last year as business made a strong comeback from the recession.
Companies analyzed by AP granted their CEOs about $1.3 billion in stock in
2010, up about $300 million from the year before. They awarded stock options
worth $702 million, or about $27 million more than the year before.
Those figures are based on formulas the companies use to estimate what the
stock and options will eventually be worth when a CEO receives the stock or
cashes in the options.
Meanwhile, pay for workers grew 3 percent in 2010, to an average of about
$40,500. The percentage increase was twice the rate of inflation, but the
average wage was less than one-half of one percent of what the typical CEO
in the AP analysis made.
Some critics of today's executive pay say boards should consider how much a
CEO has accumulated over the years when they set the next year's pay.
"Boards need to recognize that many CEOs already have enough in terms of
motivation and lifetime wealth," says Jesse Brill, chair of the website
CompensationStandards.com and an expert on CEO pay. "It is very frustrating
to see boards keep giving them more."
As evidence, Brill points to stock and options given to CEOs the past two
years. Boards at most companies grant those awards early in the year. In
2009, most were granted just as the stock market neared its lowest point in
12 years; today they are worth $2.2 billion more than the companies thought
they would be over the lifetime of the grants.
Then in 2010, CEOs in the AP analysis received another batch of stock and
options. Those have already gained about $400 million in value on paper,
based on current market prices.
"The pendulum has swung back enough for many executives," says Doug Friske,
an executive-compensation consultant at the firm Towers Watson. "Now boards
are going to have to think about what they are going to do from here."
Their decisions will be watched closely by shareholders. Government rules
passed last year require almost every public company to give investors a
vote at least once every three years on what it pays its executives. The
votes aren't binding, but they can draw unwanted attention to a CEO's pay.
So far this year, shareholders at only 12 companies have voted against pay
plans. The low number reflects the fact that many institutional investors,
such as mutual funds, tend to side with management on shareholder proposals.
One company whose shareholders voted against the pay plan was Stanley Black
& Decker. In 2010, it gave CEO John Lundgren compensation valued at $32.6
million, which made him the sixth-highest-paid on the AP's list. His pay
included a one-time grant of 325,000 shares of stock valued at $18.7
Institutional Shareholder Services, which advises large investors on how to
vote on corporate matters, had criticized Stanley Black & Decker for paying
its executives better than competitors pay theirs and for its one-time stock
Companies that get negative votes on their pay plans will have to disclose,
in the statements they file with regulators the next year, how the vote
affected their decisions on pay. So in 2012, Stanley Black & Decker will
have to say whether it changed Lundgren's pay because of the negative vote.
"They don't have to make any changes to their pay plans, but they have to
disclose what they did to respond to the negative vote, which could be
nothing," says Mark Borges, a principal at the compensation consulting firm
Some companies are doing what they can to prevent an embarrassing "no" vote.
Last month, General Electric revised the terms on 2 million stock options
granted to CEO Jeff Immelt in 2010. The changes came after GE was criticized
Under the original terms of the grant, Immelt, 55, simply had to stay at GE
until 2013 to get half the stock options and until 2015 to get the other
Now, he can't exercise any of the options until 2015, and they depend on
performance targets. For Immelt to get half the options, GE has to improve
its cash flow, and for him to get the other half, the stock has to
outperform the market.
"Shareholders don't have any tools at the moment to force companies to make
changes in pay, but there are plenty of companies making changes because
they don't want the attention of a negative vote," Borges says.
The 50 highest-paid CEOs for 2010 in an Associated Press analysis for
Standard & Poors 500 companies. The analysis includes companies that had
the same CEO for all of 2009 and 2010 and that filed proxy statements with
the Securities and Exchange Commission between Jan. 1 and April 30. They are
based on the APs compensation formula, which adds up salary, perks,
bonuses, preferential interest rates on pay set aside for later, and company
estimates for the value of stock options and stock awards on the day they
were granted last year.
Philippe Dauman, Viacom, $84.5 million, up 149 percent
Ray Irani, Occidental Petroleum, $76.1 million, up 142 percent
Leslie Moonves, CBS, $56.9 million, up 32 percent
David Zaslav, Discovery Communications, $42.6 million, up 265 percent
Richard Adkerson, Freeport McMoran Copper & Gold, $35.3 million, up 76
John Lundgren, Stanley Black & Decker, $32.6 million, up 253 percent
Brian Roberts, Comcast, $31 million, up 14 percent
Robert Iger, Walt Disney, $28 million, up 30 percent
Alan Mulally, Ford Motor, $26.5 million, up 48 percent
Jeff Bewkes, Time Warner, $26.1 million, up 35 percent
Sam Palmisano, IBM, $25.2 million, up 19 percent
David Simon, Simon Property Group, $24.6 million, up 430 percent
Gregg Steinhafel, Target Corp. $23.9 million, 83 percent
Blackrock, Laurence Fink, $23.8 million, up 50 percent
William Weldon, Johnson & Johnson, $23.2 million, down 9 percent
Brian Goldner, Hasbro, $23 million, up 196 percent
Howard Schultz, Starbucks, $21.7 million, up 45 percent
Rex Tillerson, Exxon Mobil, $21.5 million, down 1 percent
Kevin Sharer, Amgen, $21.1 million, up 38 percent
Aubrey McClendon, Chesapeake Energy, $21 million, up 13 percent
Gregory Case, Aon, $20.8 million, up 100 percent
Jamie Dimon, JPMorgan Chase, $20.8 million, up 1,541 percent
Michael Szymanczyk, Altria, $20.8 million, up 131 percent
Louis Camilleri, Philip Morris International, $20.6 million, down 16 percent
Leslie Wexner, Limited Brands, $20.5 million, up 90 percent
Randall Stephenson, AT&T, $20.2 million, no change
Miles White, Abbott Laboratories, $20 million, down 9 percent
Jay Fishman, Traverlers, $19.8 million, down 2 percent
George Buckley, 3M, $19.7 million, up 41 percent
Louis Chenevert, United Technologies, $19.5 million, up 9 percent
Robert Kelly, Bank of New York Mellon, $19.4 million, up 73 percent
G. Steven Farris, Apache, $19.3 million, up 151 percent
Carol Meyrowitz, TJX Companies, $19.3 million, up 30 percent
Ahmet Kent, Coca-Cola, $19.2 million, up 30 percent
Robert Stevens, Lockheed Martin, $19.1 million, down 7 percent
John Brock, Coca-Cola Enterprises, $19.1 million, up 34 percent
James Hackett, Anadarko Petroleum, $18.8 million, down 20 percent
Michael Duke, Wal-Mart, $18.7 million, down 3 percent
Ivan Seidenberg, Verizon Communications, $18.1 million, up 4 percent
James Mulva, ConocoPhillips, $17.9 million, up 25 percent
Andrew Liveris, Dow Chemical, $17.7 million, up 13 percent
Paul Jacobs, Qualcomm, $17.6 million, up 1 percent
John Stumpf, Wells Fargo, $17.6 million, down 6 percent
Glenn Britt, Time Warner Cable, $17.3 million, up 10 percent
H. Lawrence Culp, Danahar, $17 million, up 54 percent
Susan Ivey, Reynolds American, $16.8 million, up 4 percent
James Cracchiolo, $16.8 million, down 8 percent
J. Brett Harvey, Consol Energy, $16.6 million, up 56 percent
David Snow, Medco Health Solutions, $16.4 million, up 23 percent
Kenneth Chenault, American Express, $16.3 million, down 3 percent