CEO compensation jumped 15.7% in 2021, WTW proxy analysis finds

Rhea-AI Summary

WTW's analysis reveals that total CEO compensation in the U.S. rose by 15.7% in 2021, marking the most significant increase since 2014. Key factors included a 39.3% surge in annual bonuses and a 9.1% uptick in long-term incentives. 82% of companies met or exceeded their annual bonus targets. Additionally, 92 S&P 500 companies integrated ESG measures into incentive plans, reflecting a growing trend toward accountability in executive compensation. Overall shareholder support for pay proposals averaged 90%, maintaining prior year levels.

Positive

• Total CEO pay increased by 15.7% in 2021, the most significant rise since 2014.
• Annual bonuses surged by 39.3%, with 82% of companies meeting or exceeding targets.
• 92 S&P 500 companies added ESG metrics to their incentive plans, showing a commitment to sustainable practices.
• Shareholder support for executive pay proposals remained high at 90%.

Negative

• None.

More companies adding ESG measures to incentive plans

ARLINGTON, Va., June 09, 2022 (GLOBE NEWSWIRE) -- Chief executive officers (CEOs) at the largest U.S. corporations saw their total compensation increase at the fastest pace since 2014, according to a new analysis of proxy disclosures by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company. Significantly larger annual incentive payouts and higher values of long-term incentives granted last year contributed to the big increase in total pay.

The WTW analysis found total pay for CEOs jumped 15.7% in 2021, sharply higher than the 3.2% median increase in 2020. It’s also the largest increase for CEOs since 2014 when total pay increased around 16%. Total pay, as reported in the Summary Compensation Table (SCT) in company proxy statements, includes base salary, actual annual and long-term cash bonuses, the grant-date value of long-term incentives (such as stock options, restricted stock and long-term performance shares), the value of perquisites, earnings from deferred compensation and the change in value of executive pensions.

The analysis, based on 500 S&P 1500 companies that filed proxies disclosing 2021 pay by the end of April, noted that CEO salaries increased 2.0% in 2021, compared with a 1.1% increase in 2020. Annual bonuses soared 39.3% last year, compared with a 6.1% decline in 2020. More than eight in 10 companies (82%) paid annual bonuses that were at or above target levels compared with just 45% in 2020. In fact, annual bonuses averaged 145% of target in 2021, up from 97% in 2020. The value of target long-term incentives jumped 9.1% in 2021, compared with a 5.5% increase at the median in 2020.

“Last year was a bounce-back year for CEO compensation as well as a good year financially for many companies and shareholders,” said Don Delves, North America practice leader of Executive Compensation at WTW. “Companies continue to manage their executive pay programs carefully. The fact that CEO pay accelerated in a year when revenue growth, earnings and return to shareholders shone demonstrates that CEOs are being rewarded for performance.”

More companies adding ESG metrics to incentive plans

The separate analysis of 310 S&P 500 companies found growing interest in linking executive incentive awards to ESG measures. Ninety-two companies added an ESG measure to their 2021 or 2022 annual incentive plans, including 42 that did not previously have an ESG measure. Additionally, 22 companies added an ESG metric to their long-term incentive plans. All but one of these companies did not previously use an ESG measure in their long-term plans.

“Responding to stakeholder concerns, more companies are tying incentive award goals to achieving various ESG initiatives, such as net-zero carbon emission commitments or inclusion and diversity recruitment goals. We expect this trend to continue as part of companies’ broader efforts related to risk management, brand value enhancement, and recruiting and retention,” said Kenneth Kuk, senior director, Work & Rewards, WTW.

Strong shareholder support for say on pay in 12th year

The 12th year for mandatory say-on-pay votes is showing a relatively positive response to executive pay programs in general, but with targeted opposition to above-market pay packages driven by one-time awards. Based on WTW’s research, among the 1,003 of the Russell 3000 companies that disclosed their shareholder voting results by May 20, shareholder support averaged 90%, and 97% of proposals received majority support. This is roughly the same level of shareholder support as in previous years. 

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success — and provide perspective that moves you.

Learn more at wtwco.com.

Media contact:

Ed Emerman: +1 609 240 2766
eemerman@eaglepr.com

FAQ

What was the increase in CEO compensation reported by WTW for 2021?

CEO compensation increased by 15.7% in 2021 according to WTW.

How much did annual bonuses increase for CEOs in 2021?

Annual bonuses for CEOs soared by 39.3% in 2021.

What percentage of companies paid bonuses above target levels in 2021?

82% of companies paid annual bonuses at or above target levels in 2021.

How many S&P 500 companies linked ESG measures to executive pay?

92 S&P 500 companies added ESG measures to their incentive plans for 2021 or 2022.

What was the level of shareholder support for pay proposals among Russell 3000 companies?

Shareholder support averaged 90%, with 97% of proposals receiving majority support.