How AP and Equilar calculated CEO pay
May 31, 2023, 2:14 AM
For its annual analysis of CEO pay, The Associated Press used data provided by Equilar, an executive data firm.
Equilar examined regulatory filings detailing the pay packages of 343 executives. Equilar looked at companies in the S&P 500 index that filed proxy statements with federal regulators between Jan. 1 and April 30, 2023. To avoid the distortions caused by sign-on bonuses, the sample includes only CEOs in place for at least two years.
To calculate CEO pay, Equilar adds salary, bonus, perks, stock awards, stock option awards and other pay components.
Stock awards can either be time-based, which means CEOs have to wait a certain amount of time to get them, or performance-based, which means they have to meet certain goals before getting them. Stock 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. All are meant to tie the CEO’s pay to the company’s performance.
To determine what stock and option awards are worth, Equilar uses the value of an award on the day it’s granted, as recorded in the proxy statement. Actual values in the future can vary widely from what the company estimates.
Equilar calculated that the median 2022 pay for CEOs in the survey was $14.8 million. That’s the midpoint, meaning half the CEOs made more and half made less.
Here’s a breakdown of 2022 pay compared with 2021 pay. Because the AP looks at median numbers, the components of CEO pay do not add up to the total.
—Base salary: $1.25 million, up 4.2%
—Bonus, performance-based cash awards: $2.3 million, down 15.5%
—Perks: $222,468, up 24.5%
—Stock awards: $8.5 million, up 10.5%
—Option awards: $0 (More than half of the companies gave no option awards. The average option award was valued at $2 million.)
—Total: $14.8 million, up 0.9%
A new disclosure requirement by the Securities and Exchange Commission, called “Compensation Actually Paid,” gives some insight into how closely the fortunes of CEOs aligns with shareholder returns.
The new measure requires companies to report on the value of a CEO’s compensation at the end of the fiscal year. Unlike the traditional measure, it also includes the value of unvested stocks and stock options granted in previous years.
By this measure, many CEOs saw their compensation plunge in 2022 as the S&P 500 fell nearly 20%. But CEOs at companies whose stock price rose or that outperformed a group of peer companies could still see their pay package rise in value under the new measure.