Average CEO pay $9.6M in 2011

NEW YORK — Profits at big U.S. companies broke records last year, and so did pay for CEOs.

The head of a typical public company made $9.6 million in 2011, according to an analysis by The Associated Press using data from Equilar, an executive pay research firm.


That was up more than 6 percent from the previous year. 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 criticized CEO pay as exorbitant, that was a victory of sorts. That's because the stock awards are being tied more often to company performance. 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.

The corporate world is under a brighter, more uncomfortable spotlight than it was 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."

"I think the boards were more easily shamed than we thought they were," says Stephen Davis, a shareholder expert at Yale University, referring to boards of directors, which set executive pay.

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.

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.

And for many shareholders, their main concern — that pay is just too much, no matter what the form — has yet to be addressed.

"It's just that total (compensation) is going up, and that's where the problem lies," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

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. The median pay for U.S. workers was about $39,300 last year. That was up 1 percent from the year before, not enough to keep pace with inflation.

To determine 2011 pay packages, the AP used Equilar data to look at the 322 companies in the S&P 500 that had filed statements with federal regulators through April 30. To make comparisons fair, the sample includes only CEOs in place for at least two years.

Among the AP's other findings:

— David Simon, CEO of Simon Property, which operates malls around the country, is on track to be the highest-paid in the AP survey, at $137 million. This month, Simon Property's shareholders rejected Simon's pay package by a large margin: 73 percent of the votes cast for or against were against. But the company doesn't appear likely to change the 2011 package.

— Of the five highest-paid CEOs, three were in the top five the year before. All three are in the TV business: Leslie Moonves of CBS ($68 million); David Zaslav of Discovery Communications, parent of Animal Planet, TLC and other channels ($52 million); and Philippe Dauman of Viacom, which owns MTV and other channels ($43 million).

— About two in three CEOs got raises. For 16 CEOs in the sample, pay more than doubled from a year earlier, including Bank of America's Brian Moynihan (from $1.3 million to $7.5 million), Marathon Oil's Clarence Cazalot Jr. (from $8.8 million to $29.9 million) and Motorola Mobility's Sanjay Jha (from $13 million to $47.2 million).

The typical pay of $9.6 million that Equilar calculated is the median value, or the midpoint, of the companies used in the AP analysis. In other words, half the CEOs made more and half less.

Shareholders aren't voting en masse against executive pay. Instead, they seem to be saving "no" votes for the executives they deem most egregious.

Of more than 3,000 U.S. companies that held votes in 2011, only 43 got rejections, according to ISS. But the mere presence of the "say on pay" vote is triggering change, shareholder activists say.

"Companies that have gone through that trial by fire don't want to go through it again," says McGurn, the ISS special counsel.

So far, Citigroup is the highest-profile company to have its pay package rejected this year. The bank planned to pay CEO Vikram Pandit about $15 million for his work last year, noting that he had returned the company to profitability in 2010 and worked for $1 that year. Shareholders, who watched the stock price plunge 44 percent in 2011 (after adjusting for a reverse stock split) weren't so forgiving.

It's usually around January that boards decide how much to pay a CEO for the previous year. Then they inform shareholders and ask for their vote in the spring — usually after the cash portion has already been handed out.

Another big change is that more companies are giving themselves the right to take back a top executive's pay from previous years if they determine that the executive acted inappropriately to inflate the company's financial results.

Some shareholder groups doubt that ever-higher CEO pay, ingrained as it is in the corporate psyche, will ever be refashioned dramatically enough to satisfy shareholders and consumer groups.

"I hope we have seen the last of this," says Rosanna Weaver of the CtW Investment Group, which works on shareholder issues with union-sponsored pension funds and has lobbied against CEO pay packages at a number of companies. "But I would be very surprised, just given what I know of human nature, let alone what I know of the financial markets."

Still, she's encouraged by the change that has already been stirred.

"It's a very big task," Weaver says. "I still believe it is worth trying."

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