In the elite world of CEOs, it turns out that pay is robust as ever. But many have to stick around for a while to get the total reward.
According to the Korn Ferry Hay Group’s 10th annual CEO compensation study, median big-firm total direct pay for the corner-office chief rose 4 percent in 2016 from the year before, to $12.5 million. But the bulk of that came in long-term incentives like restricted stock or options. Actual cash compensation for CEOs, whether it came as salary or annual bonus, was $3.5 million, the same amount as in 2015.
The change reflects the mood toward CEOs and companies today, with increased scrutiny from all corners on corporate performance. According to Irv Becker, Korn Ferry senior client partner and North American leader of the Executive Pay & Governance practice, compensation committees are still focused on rewarding and retaining high-performing CEOs, but are feeling outside scrutiny, too.
“With more pressure on year-over-year financial goals and increased scrutiny from governance watchdogs, investors, and the media, it’s hard for committees to justify increases in salaries and bonuses,” says Becker. “Today, CEOs are being held to incremental goal setting and increased pressure to perform, and instead of immediate rewards, boards are turning to longer-term, performance-based incentives.”
The study tracked the primary elements of compensation for CEOs of the 300 largest public companies by revenue that filed their final proxy statements by the end of April. It found that long-term incentives now account for more than 66 percent of total CEO compensation. A CEO’s salary accounts for just 13 percent of his or her total compensation.