CEO pay packages in US dip sharply in 2022, first decline in a decade

The pay packages of CEOs (chief executive officers) pay packages in the US saw a significant decline in 2022, marking the first decrease in a decade.

Companies began evaluating gains and losses in stock awards, which constitute a significant portion of CEO pay packages. This new approach resulted in a sharp decrease in compensation for chief executive officers, with two-thirds of S&P 500 CEOs ending the year with lower overall compensation than initially awarded, as reported by the Wall Street Journal.

For instance, Elon Musk's stock awards for his role at Tesla lost nearly $10 billion in value last year. Expedia's CEO experienced a compensation reduction of $237 million due to stock declines, while Amazon.com's Chief Executive Andy Jassy saw approximately $149 million wiped out.

However, some CEOs benefited from the new evaluation method. Regeneron Pharmaceuticals' CEO Leonard Schleifer's pay package initially valued at around $7 million soared to nearly $100 million by year-end. T-Mobile CEO Michael Sievert's compensation nearly tripled from $29 million, and Occidental Petroleum CEO Vicki Hollub's pay quadrupled, rising from $15 million to approximately $60 million.

Traditionally, companies reported executive compensation based on its value when executives received it. The introduction of the "compensation actually paid" measure, as per Securities and Exchange Commission rules, aims to provide a more comprehensive disclosure that extends beyond moment-in-time assessments used by investors for years.

According to data analyzed by the Wall Street Journal using MyLogIQ, about two-thirds of top executives at S&P 500 companies experienced smaller pay packages in 2022 compared to what they were initially awarded, at least on paper. Notably, 140 CEOs earned more than expected, and 46 CEOs ended the year with at least double the amount originally planned by their boards.

It's worth mentioning that Tesla reported $0 as Elon Musk's total compensation since at least 2020. The $9.7 billion loss in value stems from a 2018 performance award distributed over a ten-year period. Expedia CEO Peter Kern's value drop is attributed to 2021 equity awards worth approximately $295 million that will continue vesting until at least 2026. Andy Jassy received 2021 equity awards totaling $212 million, which will vest until 2031.

In 2022, approximately 70% of CEO compensation, as measured traditionally, consisted of stock or stock-option awards that typically vest over several years. Among the top 25 highest-paid CEOs, each with packages exceeding $31 million, equity accounted for a median of 77% of their total compensation.

Overall, the median pay package for S&P 500 CEOs declined to $14.5 million in 2022 from a record high of $14.7 million the previous year. The median cash compensation was $3.7 million. This decline represents the first time in a decade that compensation for top executives at major US companies did not reach new highs, according to the Wall Street Journal.

Despite the overall reduction compared to 2021, around half of the CEOs received a raise, with a median increase of 11.4%.

Who got what

Sundar Pichai, the chief of Alphabet, claimed the top spot with a pay package valued at approximately $226 million under the traditional measure. However, when calculated using the new rules, his compensation is closer to $115.8 million, as reported in the company's filings.

Michael Rapino, CEO of Live Nation Entertainment, earned a $6 million signing bonus for extending his contract in 2021. In 2022, he received a $117 million stock award that will vest until 2027, resulting in a total compensation of $139 million under the traditional measure. Taking into account the value of his stock awards under the new rule, Michael Rapino made approximately $35.6 million.

Among the 28 women who served as CEOs of S&P 500 companies for the full year of 2022 (an increase from 24 in 2021), only Julie Sweet, the chief of Accenture, made it to the top 25 in terms of compensation. Her package amounted to $33.7 million, including $25.5 million in equity.

Bobby Kotick, the CEO of videogame maker Activision Blizzard, received around $179,000 in 2022. However, in 2020, he was awarded a package valued at $154.6 million.

Peter Kern, the CEO of Expedia, received $1 million in 2022 but had one of the largest pay packages among S&P 500 companies in 2021, valued at roughly $296 million at the time.

Under the new evaluation method, Leonard Schleifer, the CEO of Regeneron Pharmaceuticals, experienced the highest appreciation in his compensation package, which rose from $7 million to nearly $100 million.

These examples illustrate the varied impact of the revised evaluation approach on CEO pay packages, with some seeing significant changes in their compensation amounts.