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U.S. CEO Pay Fell Sharply in 2015, The Biggest Drop Since Financial Crisis

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April 8
7:08 AM 2016

A recent analysis report shows that last year U.S. CEOs underwent the sharpest fell in compensation than any other year since the financial crisis. The declines in CEO pay can be attributed to some factors, including the slower growth in CEO pension values.

An analysis, conducted by The Wall Street Journal, revealed that median pay for the CEOs of U.S. large public companies fell 3.8 percent last year. That dragged the amount from $11.2 million in 2014 to $10.8 million last year. The study was concluded from the data of nearly 300 CEOs of U.S.-registered large publicly traded companies.

Furthermore, the report also breaks down the median rise in CEO pay packages components. Stock-based compensation, which is the biggest component in CEO pay, rose about 7 percent. The median rise in cash-based pay, however, was only 2 percent, down from 5.6 percent in 2014. The cash pay includes salary and annual bonus.

The stock and options accounted for about 60 percent of CEO pay as the biggest component. The percentage of the stock compensation proportion saw a slight rise from recent years. Cash compensation accounts for about third of total pay, while other perks accounted for about 2 percent pay, as also reported by MarketWatch.

Another significant component, pensions and above-market interest on deferred compensation, had undergone a significant drop from 13 percent in 2014 to 6 percent last year. Previously, the pension gains contributed to push CEO pay higher at many big companies. The percentage had been relatively high due to some standard assumptions, including life expectancy, that had been a factor to calculate pension gains. Changes in the assumptions had led to lower pension gains, which in turn results in lower overall CEO pay.

Other analysis mentioned CEO turnover as another factor contributing in driving down the pay of executives, as reported by Orlando Sentinel. The analysis, based on CEOs of local companies in Central Florida, also showed a similar declining trend in average CEO salaries, reflecting the nationwide tendency.

The report highlighted some remarkable names of CEO. CEO of Hess Corp. John B. Hess had a 42.7 percent decline in pay. American Express CEO had a 3.5 percent decrease, while Johnson & Johnson CEO Alex Gorsky had a drop of 4.8 percent in 2015, compared to 2014. Even so, some CEOs still enjoy impressive paychecks amid the decline in overall trend. Google CEO Sundar Pichai, for example, received $100.5 million in 2015.

According to a recent analysis, CEO pay shrank the most in 2015 since the financial crisis. Taking into account 300 large U.S. companies, the overall median shows a 3.8 percent drop compared to the year before.

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