CEO Pay Down for First Time in Over Ten Years

Median pay for S&P 500 CEOs fell to $14.5 million in 2022 – the first decline in a decade – tracking a decline in overall market performance. According to an analysis by the Wall Street Journal, median TSR was negative 9.2% with a decline in performance even among companies with positive returns (from 30% in 2021 down to 16.6%).

The Journal continues to try to make sense of the new SEC-mandated Pay Versus Performance disclosures, including a new section of their interactive pay chart that shows “Traditional Method” vs. “New Method.” The headline seems to be that the individuals considered “highest paid CEO” change significantly when the Pay Versus Performance number is analyzed – and that in 2022, about two-thirds of the S&P 500 CEOs ended up with pay packages worth less than when they were granted. However, the Journal continues to confuse what the board intended to pay the executive for the year (Summary Compensation Table pay) with the change in value of multiple years of equity grants (Pay Versus Performance). This leads to misleading statements such as “…at 46 companies the CEOs ended with at least double what boards planned to pay them for the year.”

The WSJ article includes pay ranking for the entire S&P 500, attempting to compare (in the same table) Summary Compensation Table pay, Pay Versus Performance “Compensation Actually Paid,” 1-year TSR, and median employee pay taken from the pay ratio disclosure, among other items. Although most large investors will continue to use their own pay-for-performance evaluations, other stakeholders and media will likely reference the WSJ analysis, so it is worth a look.