S&P 500 Executive Pay Cuts Are A “Facade”

S&P 500 Executive Pay Cuts Are A “Facade”

S&P 500 executive pay cuts are a “facade” and gender diversity remains stuck new study finds


Q4 2020 hedge fund letters, conferences and more

Hedge Fund Launches Jump Despite Equity Market Declines

Last year was a bumper year for hedge fund launches. According to a Hedge Fund Research report released towards the end of March, 614 new funds hit the market in 2021. That was the highest number of launches since 2017, when a record 735 new hedge funds were rolled out to investors. What’s interesting about Read More

CEO base pay cuts represent only 6% of total compensation, and only 5% of executive roles are filled by women

Pay Cuts Announced By Companies Are A Mere ‘Facade’

CGLytics, a Diligent brand, today released its second annual S&P 500 Proxy season review providing detailed analysis of the imbalance between Chief Executive Officers (CEOs) pay compared to their performance.

Pay Cuts

The report, titled ‘S&P 500 Report – Do 2020 Trends Foretell the Future?’ finds that pay cuts announced by companies are a mere ‘facade’ representing on average only 6% of total CEO pay for the 2019 financial year. Furthermore, women are vastly outnumbered in executive roles with only 5% of companies in the index headed by women, calling into question whether shareholder ESG demands for diversity are truly being heard.

Pay Cuts

Other key takeaways include:

  • Over three-quarters of S&P 500 companies fail to align executive compensation with performance.
  • Total Shareholder Compensation (TSC) and Total Realized Compensation (TRC) both climbed from 2018 to 2019. Notably, total Long Term Incentives (LTI) Realised increased by 167 percent.
  • LTI continues to dominate CEO average pay. It forms over 70% of the average CEO pay. Base pay however forms an insignificant portion.
  • The Communications Services sector has the highest-paid aggregate compensation in the index.
  • The IT sector has the least relative alignment between pay and performance. Only 15 percent of IT companies show alignment and of the remaining companies in this sector, 45% display relative misalignment between pay and performance.
  • The 35 highest-paid CEOs reviewed in this report received an aggregated, absolute combined TRC of over $3.3 billion up by 23.6% from 2018.
  • Employee pay significantly lags CEO pay; the data suggests the average CEO pay ratio is 262 in the index.


S&P 500 CEOs Made Sizable Gains In Compensation

“The COVID-19 pandemic continues to cause significant economic hardship to millions of workers around the world. Yet our report shows the S&P 500 CEOs made sizable gains in compensation last year, even while many of them issued statements about taking pay reductions,” said Dottie Schindlinger, Executive Director of the Diligent Institute. “Progress around modern corporate governance practices is happening though. CEO-to-worker pay ratio is becoming a standard metric in shaping compensation practices, and with ESG disclosures top of mind for governments, we are seeing more companies make commitments on ESG issues and tying executive compensation to environment and social factors.”

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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