Steven Hall & Partners
Target CEO Compensation Increased +9.8% in 2018 among Early Proxy Filers
Chief Executive Officer (CEO) target pay levels increased by +9.8%, at median, in 2018 over 2017 levels among 2019 early proxy filers. Median total compensation (excluding change in pension values and perquisites) among the 100 CEOs reviewed equaled $8.5 million in 2018. Target total compensation increased for 87 CEOs, remained even for one CEO and decreased for 12 CEOs, with changes in total compensation ranging from -39% to +67%. Increases and decreases in total compensation were largely driven by changes in long-term incentive (LTI) grant values. Overall, LTI award values increased +8% at median. The Consumer Staples industry had the highest median one-year increase in total compensation (+18.8%), while the Materials (+3.9%) and Energy (+4.9%) industries had the smallest increases. These findings are based on Steven Hall & Partners’ recent study of 100 companies with revenues greater than $1 billion which filed proxies on or after January 1, 2019.
Early Filer Companies Our study collected 2017 and 2018 compensation data for 100 companies with revenues greater than $1 billion which filed proxies on or after January 1, 2019. The 100 companies reviewed represented nine different industries, with Industrials (24) and Information Technology (16) companies being the most represented. Fiscal 2018 revenues for the group ranged from $1 billion to $265.8 billion with a median value of $4.9 billion. Fiscal year ends range from September 30 to December 31 with December 31 being the most common (50).
Target Pay Mix In 2018, long-term incentives represented 63% of CEO compensation, followed by target bonuses (22%) and base salaries (15%). CEO pay mix has stayed fairly consistent over the last several years.
Among the GICS sectors reviewed:
Health Care companies delivered the highest percent of total compensation via long-term incentive awards (75%)
Consumer Staples delivered the lowest (51%)
Consumer Staples and Financial companies delivered the highest percent of total compensation in annual bonus (28%)
Health Care companies delivered the lowest (14%)
Consumer Staples companies delivered the highest percent of total compensation in base salary (21%)
Information technology companies delivered the lowest (10%)
Annual Bonus Payouts Bonuses provide the clearest link between pay and performance on an annual basis. Annual bonus plans paid above target levels in 2018. The median bonus payout equaled 106% of target in 2018, a decrease from a median of 113% of target in 2017.
Among the 100 early filers, target bonus levels increased by a median of +5.0% in 2018, while actual payouts increased +4.8%. Median net income for the same group increased +34.5% during this period with 78 companies reporting increases in net income and 22 reporting decreases.
Among companies with increased net income in 2018, actual bonuses experienced greater increases than target bonuses, while the opposite was true among the 22 companies reporting a decrease in profits. These results indicate that earnings continue to be a key component of annual incentive plans and a major determinant of actual bonus payouts.
Median Annual Bonus by Industry
Median payouts for all but two industries (Consumer Staples & Energy) have been at or above target for two years in a row
Utility companies paid the highest bonuses as a percent of target (134%)
Largest observed year-over-year increase in payout as a percent of target (+18%)
Consumer Staples had the largest one-year decrease in median bonus payouts as a percent of target (-61%)
About the Study The study analyzed compensation data for the most recent two years as disclosed in 100 proxy statements filed in 2019 for companies with revenues greater than $1 billion and CEOs with a minimum tenure of two years. For additional details regarding the study please contact Steven Hall Jr. at 212-488-5400 or email@example.com.