Despite government “regulations” and strong public disapproval, U.S. CEO pay is on the rise again and in a big way. After just a couple of years of a slow down the trend of high CEO pay, it looks like BODs are once again opening up the purse strings to enrich senior management at public companies.

A recent report from global professional services firm Towers Watson highlights that CEO total compensation was up by more than 12% in 2014. The report noted that higher pension values (with a little bet of help from the Fed), larger annual incentive payouts and more long-term incentives granted last year all added up to a large increase in total CEO pay.

CEO pay
chart via Bloomberg

 

Breakdown of the numbers in the 2014 Towers Watson CEO pay survey

According to Towers Watson, total CEO compensation leaped 12.1% in 2014, up substantially from the 1.6% median increase CEOs saw in 2013. Total pay includes base salary, actual annual and long-term cash bonuses, the grant-date value of long-term incentives (stock options, restricted stock, and long-term performance shares), the value of perks, as well as earnings from deferred compensation and the change in value of pensions. The report notes that most of the  increase in total pay is due to higher pension benefits values, which have been boosted by lower interest rates and changes to mortality tables. Of interest, if the change in pension values were not included in total pay, the median increase would only have been 8.1%.

The figures are based on 500 S&P 1500 companies that had disclosed 2014 pay by the last week in March.

Of note, CEO salaries were up 2.9% in 2014, while target annual bonuses increased by a median of 3.3%. Moreover, 62% of companies paid annual incentive awards to CEOs that were above target levels, relative to just 53% who did so in 2013. Target long-term incentives represent the largest chunk of pay for execs in most major companies, and it was up a median 7.1% in 2014 (compared to +5.9% in 2013).

Finally, the report highlights that chief execs at small-cap companies saw the largest increase in total pay in 2014. Total pay for small-cap CEOs was up by 13.7% from 2013 to 2014, compared to 11.6% for CEOs at large-cap firms and 10.6% for chief execs at mid-cap firms. Of note, wage inflation for workers has grown much slower, but on a positive note – there are signs that it is starting to pick up.