DOWN TO BUSINESS: New report highlights S&P 500 companies in need of check on CEO pay

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Life is pretty good if you’re the CEO of a company in the S&P 500, where pay averaged $18.8 million, as calculated from 2022 regulatory filings, up almost 21% from the previous year.

And if you were among the 100 most overpaid CEOs in the group, as identified last week by shareholder advocate As You Sow, your pay averaged $38.1 million, up nearly 31%, while your public company underperformed the Standard & Poor’s index of the country’s 500 widely held stocks.

As it does yearly ahead of spring proxy season, As You Sow released an accounting of CEO pay with an eye on the most overpaid leaders/underperforming companies in the S&P 500. The goal is to get shareholders’ attention as they receive material for public company annual meetings, the bulk of which come between April and June.

Working with partners steeped in the data, As You Sow weighs factors such as total shareholder returns versus pay, shares voted against CEO pay packages, and the ratio of CEO pay to median worker pay to find the “most overpaid” chief executives. Although the pay numbers are from the companies’ most recent proxy statements, they date to 2021.

The report put the CEO of Warner Bros./Discovery at No. 1, with total compensation of $246.6 million. Other everyday names are listed among the top 100, too, including Amazon, Apple, Walmart, Netflix and Starbucks. General Electric is there at No. 35, with CEO pay of $22.7 million.

As You Sow used a webinar to underscore some of the report’s findings, with former U.S. Labor Secretary Robert Reich drawing attention to the growing gap between CEO and worker wages, a ratio that public companies must publish in their proxy filing.

While in the 1970s observers were concerned with CEOs making 60 times the typical worker at their company, Reich said, nowadays the ratio is 324-to-1, even as two-thirds of Americans live paycheck to paycheck. The report put the CEO-to-worker pay ratio at nearly 3,000-to-1 at Warner Bros./Discovery; it’s even higher at some other companies.

“We are in the Twilight Zone right now, folks,” Reich said.

He encouraged institutional investors and pension funds to take more of a role in controlling skyrocketing pay as they vote their shares at annual meetings.

Report co-author Rosanna Landis Weaver of As You Sow said advisory “no” votes on pay can persuade a public company board to rethink CEO compensation, citing examples such as reductions at quick-service restaurant chain Chipotle and hotelier Hilton after investor votes against pay.

R. Paul Herman, whose company, HIP Investor, helped parse the report’s numbers, noted that shareholders who invested in the companies led by CEOs identified as overpaid generally saw their returns lag others on the S&P index.

“Overpaid CEOs are a leading indicator of future risk” and “lesser return,” he said, reminding webinar listeners that “your portfolio is your money.”

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at  [email protected]


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