Consumer Goods CEOs Among Nation's Highest Compensated as Pay Gap Grows
While preliminary research from Equilar indicates the median CEO pay among the top 100 was $14.4 million in 2011, some companies are taking a closer look at executive salaries. Hostess Brands last week announced it would reset top managers' pay following a backlash from creditors and employees, while research from the University of California-Berkeley suggests the pay gap between top executives and most Americans has widened since the recession ended. Incomes in the top 1 percent increased 11.6 percent from 2009 to 2010, while the remaining 99 percent of incomes rose 0.2 percent, the research indicates.
Chief executives from consumer goods companies are disproportionately present on the list of 2011 top paid corporate executives, according to new, preliminary data from Equilar.
Most of the companies with executives on the list have achieved strong earnings and stock price growth, said Aaron Boyd, director of research at the Redwood City, Calif.-firm specializing in executive compensation data. Their compensation packages reflect their success."The people that show up on the list, for the most part, their companies did well," he said.
Among the highest paid CEOs are Muhtar Kent of Coca-Cola, who had a base salary of $1.35 million but raked in a total of $21.1 million when additional compensation including $6 million cash bonus, $5.6 million in stock and $7.5 million in options granted are factored in, according to Equilar data. Other high earners listed include Robert McDonald of Procter & Gamble with total compensation of $16.2 million and Indra Nooyi of PepsiCo at $14.1 million.
But some corporations are taking a closer look at executive salaries in the wake of say-on-pay rules passed in 2011 requiring shareholder advisory votes on executive compensation, while the Occupy Wall Street movement also has highlighted the growing wage gap between the top and bottom U.S. earners. While the median CEO pay in the Equilar list was $14.4 million, The New York Times reported Bureau of Labor Statistics data indicating the average annual salary for Americans is $45,230 a year.
Hostess Resets Salaries
The disparity can impact morale. In the wake of recent criticism from creditors and unionized workers about managers' compensation, Hostess Brands announced last week it would roll back the pay raises it gave top managers in July 2011 prior to the company's filing for Chapter 11 this past January. While it was boosting managers' pay, Hostess eliminated its 401(k) match for rank-and-file workers and laid off 10 percent of the workforce, according the New York Post.
As more people speak up about pay inequities, companies are under pressure to explain how they determine compensation. New research from the University of California at Berkeley indicates families in the top decile, comprised of those earning more than $108,000 annually, represented 47.9 percent of real incomes in the United States in 2010.
The pay gap between top and bottom incomes widened after the 2008-2009 recession ended, noted the report's author, Emmanuel Saez, who is the E. Morris Cox professor of economics and director of the Center for Equitable Growth at the University of California at Berkeley. The top 1 percent had incomes of more than $352,000 in 2010, an increase of 11.6 percent from 2009, as the economy recovered, while the remaining 99 percent of incomes rose 0.2 percent." Such an uneven recovery can possibly explain the recent public demonstrations against inequality," Saez wrote.
Companies Slow to React
Still, Equilar's data doesn't yet reflect a sea change in executive compensation, and Boyd doubts one is coming. "I have not see any evidence that a company reduced [CEO] pay because of the Occupy movement," Boyd said, noting that the say-on-pay rules stemming from the Dodd-Frank Act had a larger effect in bringing to light governance issues surrounding compensation. "Companies are more aware of their numbers and how they will be received by the public and investors," Boyd said.
With CEO compensation increasingly tied to the company's stock performance, Boyd said it's unlikely executive compensation will fall unless the company's financial results decline.
"If the stock market shoots right up, CEOs can stand to take home a lot more compensation than standard workers" whose pay isn't tied to the company's performance, Boyd said.
What's more, the global marketplace has pushed down the cost of labor, though top executives appear to be immune. "You can't outsource the CEO's job to another country," he said.