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The median pay for S&P 500 chief executives jumped 9 per cent to $15.7mn in the year to April 15, widening the gulf in remuneration between US and UK bosses.
The rises came despite the underperformance of some US companies last year, according to analysis by ISS-Corporate, a division of Institutional Shareholder Services.
In the UK, FTSE boards are under pressure to increase CEO pay. UK executives complain they are underpaid in comparison with their transatlantic peers, with several warning of a talent exodus unless their pay is more competitive.
Median total pay for UK chief executives at the first 55 companies to publish annual reports rose 4 per cent to £4.5mn in 2023. FTSE CEOs were paid a median £3.91mn in 2022, a £530,000 rise from the previous year, according to an annual study by the High Pay Centre think-tank.
The London Stock Exchange’s David Schwimmer and Peter Harrison, chief executive of FTSE 100 asset manager Schroders, are among those who have called for greater pay parity with the US.
More than half the S&P 500 companies analysed increased shareholder returns last year as the stock market charted new highs on the back of rate cut expectations.
“The 9 per cent increase is not surprising given the stock market performance” last year, said Tom Yarnall, a director at Infinite Equity, a US pay consultancy. US executive pay was likely to keep going up if the economy stays strong, he said.
But at 65 companies — 20 per cent — pay increased even as performance declined.
Hasbro, maker of the Monopoly board game, Southwest Airlines and healthcare business Baxter are among companies that increased CEO pay while their shareholder returns fell in 2023.
Hasbro, which owns licensing deals with Disney to make Marvel toys, increased pay for chief executive Chris Cox by 60 per cent in 2023, the company reported. Its share price declined 16 per cent last year, and its shareholder return has underperformed peers for four years in a row, the company reported in its pay-versus-performance table this month. Rhode Island-based Hasbro did not respond to requests for comment.
CEO pay at Southwest and Baxter increased in 2023 despite share price declines for the year. They also underperformed their peers on shareholder returns.
On corporate boards, “people are starting to be more aggressive in their benchmarking: ‘I need to pay more to retain them in the next [business] cycle. I need to keep pushing the ball forward,’” Yarnall said.
As most chief executive pay is tied to the company’s share price, the overall stock market gains fattened bonuses. But since January investors have trimmed their expectations of Fed action this year.
At companies where executive pay was increasing while shareholder return was decreasing, “shareholders should absolutely be concerned about that and look into those cases,” said Matteo Tonello, a managing director at The Conference Board.
Baxter said pay for CEO José Almeida increased in 2023 because of a short-term bonus, “which reflected stronger business performance”. Almeida’s pay actually received over the past three years was only about half of what was targeted, Baxter said.
South-west declined to comment beyond its regulatory filings.
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