Ever wonder what the chief executive officer of a large publicly traded company earns in total pay when including perks and stock options? Or, perhaps more importantly, if the executive truly deserves of that amount of compensation? To answer these questions, I looked closely at statistics from the 50 largest (by market cap) members of the S & P 500. (Note that I excluded foreign entity UBS and replaced it with the Altria Group (MO). Also Berkshire Hathaway (BRK.A) was excluded as it was not part of the S and P 500 when I began this study.)
I then compared the executive’s total pay to the executive performance both individually and in comparison to the executive’s peers. Executive pay was investigated with respect to the number of employees led, revenues and earnings generated, and share performance (excluding dividends). One could look at these tables I created and perhaps correctly conclude that the lowest ranked CEOs in the executive pay per employee column, and in the percentage of revenues and of earnings columns as the best bargains. However share performance should be looked at too. Also, there are many other ways to examine the performance of executives besides what I have included here, but I thought this was a good start.
To gather the data, I used a wide variety of sources including Yahoo Finance, Google Finance, corporate 10ks and 10Qs, Reuters, Forbes and the AFLCIO web site. For executive pay, the AFLCIO web site offered information on executive pay in 2 ways. The first included vested options and the second included option grants. The AFLCIO web site favors the second way as it feels that is a more accurate portrayal of executive total pay. Corporations though use vested options when totaling executive pay as this is GAAP reporting. Both methods have merits, so I decided to average them out and then called this statistic Average CEO Pay.
Also, a note about the fiscal year end dates used. Much of this information comes from year-end 10-K filings. However, not all companies use the same fiscal year, nor are many 10-Ks for 2009 yet filed, so I then focused on the latest fiscal year that was available. Mostly, this was fiscal year ending December 31st 2008. But some of the data also includes companies that had their fiscal year’s end on different dates in 2009 meaning that some share performance statistics may not compare fairly. The data from 2008 turned out to be important because executive pay scales were determined in an environment then that was less scrutinized than the current one. 2008 was a year of turmoil in the financial markets and the recession was gaining steam.
One last observation about executive pay: when the executive was paid on the low side when compared to peers, the executive was often a founder or joined the corporation in its early stages. This was especially true with Steve Jobs of Apple (AAPL) and Eric Schmidt of Google (GOOG), who tend to already be very wealthy from their existing share holdings, whereas other executives are not in that position. However Larry Ellison turns out to be the exception here as he is near the top of the executive compensation rankings and was at Oracle (ORCL) when it first started up.
Here are some other interesting quick stats: The average CEO total pay was $19.6 million; the average number of employees was 170,000; the CEO was paid an average of $459 per employee; average annual revenues were $78 billion and earnings were $5.8 billion; CEO pay was an average of 0.06% of revenues, and 0.42% as a percentage of earnings. The lowest paid CEO was Steve Jobs of Apple at $1 per year. The highest was Larry Ellison of Oracle. The lowest paid CEO per employee (aside from Jobs) was H Lee Scott of Wal Mart (WMT), the highest Ray Irani of Occidental Petroleum (OXY). The lowest CEO pay as a percentage of company revenue was Microsoft’s (MSFT) Ballmer, the highest (aside from Ellison) John Martin of Gilead (GILD). The largest corporate earners were Exxon Mobile (XOM) and Chevron Texaco (CVX).
Two companies lost money for their respective periods and these were Citi (C) and Conoco Philips (COP). The lowest paid CEO as a percentage of corporate earnings (aside from Jobs and Ballmer 1st and 2nd respectively) was Eric Schmidt of Google. The highest paid CEO as a percentage of corporate earnings was American Express’s (AXP) Kenneth Chenault. The best stock performance was a 65% return by Monsanto’s (MON) stock but the fiscal year ended on August 31st. If looking at the Dec. 31st fiscal years, Gilead’s John Martin, and McDonalds’ (MCD) James Skinner led their companies to positive stock returns. The worst returns were from Citi led by Vikram Pandit, Goldman (GS) led by Blankfein and American Express led by Chenault.
Here are the tabulated stats:
|Symbol||CEO Name||Avg CEO Pay ($)||# of Employees||CEO Pay per Empl.||Date|
|WMT||H Lee Scott||19,263,774||2,100,000||9||1/31/2009|
|KO||E. Neville Isdell||27,490,189||92,400||298||12/31/2008|
|MRK||Richard T Clark||15,521,634||55,200||281||12/31/2008|
|UPS||D Scott Davis||5,741,972||426,000||13||12/31/2008|
|MDT||William A Hawkins III||8,282,600||41,158||201||4/24/2009|
|BA||W James McNerney Jr.||17,802,930||157,100||113||12/31/2008|
|KFT||Irene B. Rosenfeld||17,848,339||98,000||182||12/31/2008|
|GILD||John C Martin||11,775,975||3,441||3,422||12/31/2008|
|MO||Michael E Szymanczyk||11,600,000||10,400||1,115||12/31/2008|
|Symbol||Revenues||CEO Pay as % Revs||Corp. Earn||CEO Pay as % Earn||% Share Returns|
Authored by Tom Henderson, Strategist JBH Capital.
Disclosure: Long-term tiny shareholder in Exxon Mobil.