Are CEO Salaries Out of Control?
Times are tough for many households, with soaring inflation following the huge economic disruption triggered by the Covid-19 pandemic. The personal finances of leading chief executives, on the other hand, are looking very healthy indeed.
Executive pay packages have been surging on both sides of the Atlantic. In the UK, total remuneration for the heads of FTSE 100 companies increased by a third last year, with a median of £4.1m. One study found that the typical UK chief executive now has an income more than 80 times that of their median employee.
But that’s nothing compared with the US, where the same ratio reached 245 to one last year. Median pay for S&P 500 company CEOs hit $14.5mn last year, up 17 per cent from 2020. Some made far more, like Expedia’s Peter Kern who earned $296m for the year, and Amazon’s Andy Jassy, who earned $212mn – or 6,400 times the pay of the median Amazon employee.
Investors have been pushing back against these soaring pay awards. Amazon’s bonus grants to Jassy and other executives got just 56% support from shareholders at its annual meeting this year, down from normal levels above 97 per cent.
For big US companies in general, support rates for executive pay packages over the past year have been markedly lower than in previous years. Some influential investors have been particularly outspoken on this issue. The head of Norway’s sovereign wealth fund – the world’s largest investment fund – recently told the FT, quote: “We are seeing corporate greed reaching a level that we haven’t seen before.” The Church of England’s pension board has said the executive pay system is “broken”. Even the billionaire corporate raider Carl Icahn has joined the cause, with a campaign against retailer Kroger over the widening gap between its executive and worker pay.
Corporate bosses may want to enjoy those bulging pay packages while they still can.