US Company CEOs' Compensation Increased by 5% Last Year... Corporate Profits Decreased by Over 10%

Median Compensation is 14.1 Billion KRW... General Employee Compensation Growth Rate is 2.6%

President Joe Biden of the United States [Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Despite the slowdown in corporate earnings due to COVID-19 last year, it has been confirmed that the compensation of CEOs of major U.S. corporations increased.

According to a recent report by the Associated Press citing data from Equilar, a corporate information research firm, the total compensation of CEOs of companies in the Standard & Poor's (S&P) 500 last year was $12.7 million (approximately 14.1 billion KRW), a 5% increase compared to 2019. The rate of increase in compensation was actually higher than the 4.1% seen in 2019. Despite the fact that the earnings per share of S&P 500 companies fell by more than 10% last year, CEO compensation increased.

The wage increase rate for employees was calculated at 2.6%, about half that of CEOs. As a result, CEO compensation was found to be 172 times that of the average American worker, up from 167 times in 2019. This indicates a widening wealth gap between classes.

U.S. President Joe Biden is pushing for tax increases on high-income earners to address this wealth disparity. On the 28th, President Biden unveiled a $6 trillion (approximately 6700 trillion KRW) federal budget proposal for fiscal year 2022 (October 2021 to September 2022), which included plans to raise the top income tax rate. Biden announced that the top income tax rate would be increased from 37% to 39.6%, applying to high earners with a combined annual income of $509,300 or more for couples and $452,700 or more for individuals. He also stated plans to raise capital gains taxes on profits from the sale of real estate, stocks, bonds, and other assets.

Equilar’s CEO compensation survey targeted CEOs who had served for more than two years. There were 342 CEOs meeting this criterion, and 61% of them received higher compensation than in 2019. This percentage is similar to the 62% of CEOs who saw pay increases in 2019.

Among the 342 CEOs surveyed, 16 were women. This number decreased by four from 20 in 2019, following the departure of Virginia Rometty of IBM and others. Of the 16 female CEOs, 13 saw their compensation increase last year. However, the median compensation for female CEOs was $13.6 million, a 1.9% decrease compared to 2019.

Among female CEOs, Lisa Su of AMD received the highest compensation. She earned a total of $27.1 million, including a base salary and cash bonus exceeding $1 million and $2.5 million respectively, plus $23.5 million in stocks and stock options. However, Su’s compensation was more than halved compared to $58.5 million in 2019. Mary Barra of General Motors (GM) received the second highest compensation among female CEOs, earning $23.2 million last year.

Many CEOs voluntarily cut their salaries last year as a gesture of sharing the pain caused by the COVID-19 pandemic. About 20% of the 342 CEOs surveyed reduced their pay. However, salary accounted for only 7.7% of total CEO compensation. The remainder consisted of bonuses and performance-based stock awards.