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Thank You Record Stock Buybacks: Median CEO Comp Rises Over $10 Million For First Time

Tyler Durden's picture




 

If there was some confusion yesterday why in the first quarter, seemingly having no better capital allocation option S&P500 corporate CEOs spent a record $160 billion on stock buybacks, then the following report should explain it: According to a new study by the AP, the median pay package for a CEO rose above eight figures for the first time last year. The head of a typical large public company earned a record $10.5 million, an increase of 8.8 percent from $9.6 million in 2012, according to an Associated Press/Equilar pay study.

The study details:

Last year was the fourth straight that CEO compensation rose following a decline during the Great Recession. The median CEO pay package climbed more than 50 percent over that stretch. A chief executive now makes about 257 times the average worker's salary, up sharply from 181 times in 2009.

In case anyone missed it, here are the key points from the above extract:

  • CEO comp has risen 50% over the past five years, and was up 8.8% in 2013. By comparison, the income of the US middle class has declined over this time period.
  • The average CEO now make 257 times the average worker's salary, up 41% since 2009.

Got all that? Ok, let's continue. Some other findings:

  • Female CEOs had a median pay package worth more than their male counterparts, $11.7 million versus $10.5 million for males. However, there were only 12 female CEOs in the AP/Equilar study compared with 325 male CEOs that were polled.
  • The CEO who got the biggest bump in compensation from 2012 to 2013 was Rodney Sacks, the CEO of Monster Beverage. Sacks earned $6.22 million last year, an increase of 679 percent. Monster's board of directors awarded Sacks $5.3 million in stock options to supplement his $550,000 salary and $300,000 cash bonus.

Which industry made the most buck?

  • The industry with the biggest pay bump was banking. The median pay of a Wall Street CEO rose by 22 percent last year, on top of a 22 percent increase the year before. BlackRock chief Larry Fink made the most, $22.9 million. Kenneth Chenault of American Express ranked second with earnings of $21.7 million.
  • Media industry CEOs were, once again, paid handsomely. Viacom's Philippe Dauman made $37.2 million while Walt Disney's Robert Iger made $34.3 million. Time Warner CEO Jeffrey Bewkes earned $32.5 million.

Who is at the top:

  • The best paid CEO last year led an oilfield-services company. The highest paid female CEO was Carol Meyrowitz of discount retail giant TJX, owner of TJ Maxx and Marshall's. And the head of Monster Beverage got a monster of a raise.
  • The highest paid CEO was Anthony Petrello of oilfield-services company Nabors Industries, who made $68.3 million in 2013. Petrello's pay ballooned as a result of a $60 million lump sum that the company paid him to buy out his old contract. Petrello was one of a handful of chief executives who received a one-time boost in pay because boards of directors decided to re-negotiate CEO contracts under pressure from shareholders. Freeport-McMoRan Copper & Gold CEO Richard Adkerson also received a one-time payment of $36.7 million to renegotiate his contract. His total pay, $55.3 million, made him the third-highest paid CEO last year.
  • The second-highest paid CEO among companies in the S&P 500 was Leslie Moonves of CBS. Moonves' total compensation rose 9 percent to $65.6 million in 2013, a year when the company's stock rose nearly 70 percent. "CBS's share appreciation was not only the highest among major media companies, it was near the top of the entire S&P 500," CBS said in a statement. "Mr. Moonves' compensation is reflective of his continued strong leadership."

But the punchline: what, according to AP, was the reason for this compensation surge to all time highs? "A soaring stock market."

Over the last several years, companies' boards of directors have tweaked executive compensation to answer critics' calls for CEO pay to be more attuned to performance. They've cut back on stock options and cash bonuses, which were criticized for rewarding executives even when a company did poorly. Boards of directors have placed more emphasis on paying CEOs in stock instead of cash and stock options.

Which brings us to the crux of the issue.

As we showed yesterday, in Q1 companies in the S&P 500 spent a record amount of cash not on growth (or maintenance) capex, not on employee salaries, but on stock repurchases - that one most direct way to boost a company's stock price and to "beat" Wall Street expectations by reducing the number of shares outstanding.

 

And now we also learn of the other "unintended" benefit of record stock buybacks, if only to CEOs: as a result of cost-indiscriminate buying back of their stock, as in using corporate cash, Corporate CEOs, whose pay is now more closely tied to stock performance than ever, were also paid the most. Ever.

Or to simply further: out of the corporate cash pocket and into the personal cash pocket. Rinse. Repeat.

And since the S&P 500 ends up at record highs, everyone is happy, except for the employees of said company, who, long after the CEO is retired on their own private island, are virtually assured of wholesale layoffs as the next management team scramble to figure out how to keep the business going under a record debt load.

But yes - it was all under duress, and none would have done it had it not been for those evil activist hedge fund investors twisting their hand to buyback their shares. Not a single one.

Finally, here is the distribution of CEO pay relative to stock performance in 2013, with the distribution coming in perfectly as expected.

 

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Wed, 05/28/2014 - 09:37 | 4801505 negative rates
negative rates's picture

It is easier for a camel to walk through the eye of a needle, than it is for a rich person to make it to heaven.

Wed, 05/28/2014 - 09:42 | 4801527 SanfordandSon
SanfordandSon's picture

A camel can't walk through the eye of a needle, so what's going to happen to all these corporate Hostess Ho-ho's?

Wed, 05/28/2014 - 09:58 | 4801552 BandGap
BandGap's picture

They are literally sacrificing their own companies to get as much booty before heading to the life rafts. If the focus of the media highlights the buybacks as reasons for the propping up, hence the bonuses, this could be the that last act of this wonderful play, The Great Collapse.

Wed, 05/28/2014 - 10:07 | 4801578 BeetleBailey
BeetleBailey's picture

Agreed.

To a TRADER, the money to be made NOW, is the downside....

Wed, 05/28/2014 - 10:12 | 4801597 bpj
bpj's picture

To be honest, I would do the same thing, get while the getting is good (make hay while the sun is shining, strike the iron while it is hot,). As to the life boats, I would be first on and dressed in drag. Ethics and morals are so 1940s

Wed, 05/28/2014 - 10:11 | 4801593 tarsubil
tarsubil's picture

Cross out rich and the statement is still true. You can argue but look around at the world of people going their own way and that is overwhelming evidence to the basic truth.

Wed, 05/28/2014 - 11:02 | 4801838 walküre
walküre's picture

Unless the /sarc tag is missing, I suggest you keep telling yourself that and get ass raped while you're alive and breathing and having money actually matters.

What do I care IF anyone rich or poor goes to "heaven". I'll be dead and won't know.

Sounds ignorant you think? Well, at least I'm not lying to you.

Wed, 05/28/2014 - 09:39 | 4801513 DaveyJones
DaveyJones's picture

the trickle up theory

Wed, 05/28/2014 - 09:49 | 4801539 NoDebt
NoDebt's picture

I feel something trickling down my back.  They're telling me it's rain, but I'm not so sure.

Wed, 05/28/2014 - 10:04 | 4801568 CheapBastard
CheapBastard's picture

The scamming will never end b/c the only ones who can end it are shareholders. But guess who are the biggest shareholders?

Usually other scammers like giant pension funds and investment banks and they're scamming so much in fees, etc themselves. No one will rock the money boat. The little investor with a few thousand shares is an invisible man.

That's one reason I like management like FCX and NE; my experience has been they use the cash to CapEx or hand it out in dividends as opposed to lining their own pockets.

Wed, 05/28/2014 - 10:06 | 4801577 Bangin7GramRocks
Bangin7GramRocks's picture

Worse than that. Several companies have had shareholder votes on compensation. The packages were voted down, but surprise surprise, the vote was non-binding. The criminal pay just keeps on keeping on. So fuck all those fucking assholes who say the shareholders approve. And the boards are all stocked with other criminally paid assholes who will never vote to end the gravy train on a fellow asshole.

Wed, 05/28/2014 - 11:34 | 4801983 SmackDaddy
SmackDaddy's picture

From my company's most recent proxy:  Broker non-votes are shares held of record by brokers or other nominees that are present in person or by proxy at the meeting, but are not voted because instructions have not been received from the beneficial owner with respect to a particular matter over which the broker or nominee does not have discretionary authority to vote. Broker non-votes are counted toward the establishment of a quorum. If you do not return a proxy card and your shares are held in “street name,” your broker may be permitted, under applicable rules of the self regulatory organizations of which it is a member, to vote your shares in its discretion on certain matters that are deemed to be routine, such as ratification of the appointment of our independent registered public accounting firm.

I'm guessing most of the 401k crowd doesnt have a fucking clue what they are holding.  And I guess I never though about it, but shouldnt Vanguard be asking me how I want to vote on the companies in my S&P index?

Wed, 05/28/2014 - 11:43 | 4802022 CheapBastard
CheapBastard's picture

I'm waiting for the Buy Back of the hundreds of thousands of crappy houses sold to Merikans these last few years. The wind blows thru the windows and doors, the roofs are cheaply installed and for many the wind blows right thru the window frame.

 

It's a shame. Building codes are not too good either. It's The Minimum requirement, not necessarily the desired standard.

If they're so hot on Buy Backs, let them Buy Back all those overpriced boxes that depreciate faster then a GM car.

Wed, 05/28/2014 - 10:17 | 4801610 Ban KKiller
Ban KKiller's picture

If that trickle is warm and you are in the topics, ok. If not, it is the ghost of Reagan piss.

Wed, 05/28/2014 - 09:40 | 4801520 AccreditedEYE
AccreditedEYE's picture

The "Average Working Joe (Stiff)" has finally been rendered obsolete... They now have their own printing press!

Wed, 05/28/2014 - 09:40 | 4801521 Stoploss
Stoploss's picture

Takes a lot of money to drive a company into the ground now day's.

Or, get a woman CEO and drive that motherfucker under the ground, eh Mary??

Wed, 05/28/2014 - 09:42 | 4801524 Bangin7GramRocks
Bangin7GramRocks's picture

But they earn every penny and the shareholders approve the money, so who cares what they are paid. That's the approved Red team statement right? Fucking despicable that people don't get angrier at this. It is organized crime.

Wed, 05/28/2014 - 10:01 | 4801566 kahunabear
kahunabear's picture

And the shareholders are the institutions that manage money. No conflict there. Ha.

Wed, 05/28/2014 - 10:13 | 4801531 HUGE_Gamma
HUGE_Gamma's picture

"but! if you price it in Gold.."

Wed, 05/28/2014 - 09:50 | 4801537 Dr. Engali
Dr. Engali's picture

Keep widening that wealth gap assholes, and don't leave anything for anybody else. Sooner or later the sheep are going to get hungry, but instead of coming after you they'll turn on the rest of us you greedy fucks. We, however, know who the real criminals are.

Wed, 05/28/2014 - 09:59 | 4801556 BandGap
BandGap's picture

All by design.

Band togther, kill the zombies. Then go after the creators of the zombie army.

Wed, 05/28/2014 - 10:32 | 4801669 Chupacabra-322
Chupacabra-322's picture

@ Dr. Engali,

Wealth? It's not wealth. It's all Fiat & fake. At the end of the day the Criminals will just as hungry & poor as the rest of us.

Wed, 05/28/2014 - 10:52 | 4801767 Bangin7GramRocks
Bangin7GramRocks's picture

Not the smart ones. Many have already purchased land, personal armies and gold. Sadly, most of these assholes will still be rich and safe after the reset.

Wed, 05/28/2014 - 11:39 | 4802012 Dr. Engali
Dr. Engali's picture

Are you telling  me that you really believe that they aren't converting to hard assets when they cash in their options?

Wed, 05/28/2014 - 09:48 | 4801538 aardwolf
aardwolf's picture

How much would I pay for someone to do "God's Work" on Lloyd Blankfein? 

Wed, 05/28/2014 - 09:59 | 4801557 swmnguy
swmnguy's picture

When one kid has all the property, houses, hotels and money, the other kids can't play anymore so they go outside and do something else.

I suppose the one kid could set up a shell company and sell his houses, hotels and property to himself, over and over, so he can keep feeling like a winner.

Wed, 05/28/2014 - 10:01 | 4801563 orangegeek
orangegeek's picture

Busted!!!!!!!!!

 

And the MSM?????   Slumped over on their typewriters having a snooze.

Wed, 05/28/2014 - 10:18 | 4801608 what's that smell
what's that smell's picture

MSM?---surfing "porn", playing "candy crush saga", and fellating their "superiors".

THE....GREATEST....NATION....IN....THE....HISTORY....OF....THE....UNIVERSE.

USA! USA! USA!

BTFD, BTFATH, BUYBUYBUY!

Wed, 05/28/2014 - 10:04 | 4801571 BeetleBailey
BeetleBailey's picture

The liberal cunt-media already has the sheeple trained...

over 60% in a recent poll I saw on a dumbed down web goo site said CEO pay needs to be capped....

 

Wed, 05/28/2014 - 11:13 | 4801899 Slave
Slave's picture

Band-aid over a massive gaping wound.

What I've seen is them all begging for tax increases on the "rich" which will only actually lead to tax increases on everybody else. I've even heard some Democrats complaing about people with "hundreds of thousands of dollars". Getting pretty extreme now...

As usual, the elites are three steps ahead of everybody else.

Wed, 05/28/2014 - 12:19 | 4802166 Frilton Miedman
Frilton Miedman's picture

Divide and conquer, drown the masses in partisan propaganda, get them to blame & insult eachother rather than the perpetrators.

 

 

Wed, 05/28/2014 - 10:22 | 4801572 AGoldhamster
AGoldhamster's picture

It's all Bush's fault.

Aside of that everything is sacrified for the sake of freedom - and especially freedom for unlimited greed.

I have already mentioned it in one of my earlier posts: human race stinks (unbearable) from its head (our leaders) as well from its feet (the sheeple).

Wed, 05/28/2014 - 10:24 | 4801630 what's that smell
what's that smell's picture

It's all Bush's fault....

why do you hate Genitalia so much?

Wed, 05/28/2014 - 10:19 | 4801616 Ban KKiller
Ban KKiller's picture

All part of knowing your enemy, right? If these folks don't give back...

The hungry will revolt...only if internet and TV go off line.

Wed, 05/28/2014 - 10:22 | 4801620 Caveman93
Caveman93's picture

I have eleventy billion dollars and can't buy an egg or milk with any of them..."Said someone soon when the dollar collapses."

Wed, 05/28/2014 - 10:24 | 4801629 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

90% of success is just showing up.

Wed, 05/28/2014 - 10:28 | 4801647 oklaboy
oklaboy's picture

Tyler, the current of this reads us versus them. Now let's ook at the facts: what else are they going to do? were are you going to put your money? Move it off shore? How is IBM going to grow there business? Every major on the S&P 500 is retrenching, fortifying the balance sheets, and yes accumulating debt at bargain basement prices. I would do the same thing, and collect all the way to the bank, just like they are. And Obama is not cashing in along with the clintons? Basically my point is they have, for the most part, there is no were else to go at this time. The consumer is tapped out, internet is flooded with either start ups( that get snapped up) or the established players ( Google, cisco, ) that do the snapping up. What is a good opportunity? Car rental, building houses, manufacturing, drugs, insurance? There is no great break thru on the horizon as the past has shown ( I revolution, railroads, oil, computers, internet) to drive inovation or social change. Retail is crumbling, as you have pointed out, consumer is tapped out, and the only growing portion of the economy is goverment, which is not going to end well.     

Wed, 05/28/2014 - 12:01 | 4802107 The Most Intere...
The Most Interesting Frog in the World's picture

The reality is that there has been such a gigantic collapse in end demand, you are right, there is nothing to do with the money.  What? Open another store?  Build another commercial building?  The amount of buybacks simply serve to highlight the lack of growth.

Buybacks are far less disasterous in the long run, in my mind, than producing millions of cars and "selling" them to dealers.  Or fraudulently inducing individuals to take on student loan debt for shit degrees.  Or the absolute massive malinvestment that is currently going on in the federal government.

McDonalds through in the towel this morning - more buybacks...  Who can blame em?

 

Wed, 05/28/2014 - 10:33 | 4801673 MasterOfTheMult...
MasterOfTheMultiverse's picture

And Piketty is all wrong about economic inequality on the rise, move along people, nothing to see here. The new Bourgeosie is here already. Kim Kardashian got married in Versailles, it doesn't get more ironic. The French Revolution started with an economic crisis, how long before desperate sheeple start executing CEO's?

Wed, 05/28/2014 - 10:41 | 4801719 Itchy and Scratchy
Itchy and Scratchy's picture

Nice to see the 'Regulators' on the job! Zzzzzzzzz.......

Wed, 05/28/2014 - 11:49 | 4802047 The Most Intere...
The Most Interesting Frog in the World's picture

McDonalds has officially thrown in the towel...

 

McDonald's to return $18B to $20B to shareholders between 2014 and 2016
Wed, 05/28/2014 - 12:24 | 4802193 Took Red Pill
Took Red Pill's picture

" A chief executive now makes about 257 times the average worker's salary, up sharply from 181 times in 2009"

Holy crap! No wonder McDonald's workers are demanding $15 an hour!

Wed, 05/28/2014 - 15:14 | 4802205 Frilton Miedman
Frilton Miedman's picture

 

 

 

The MSM throws us tablescraps of contempt, we predictably fight like rabid dogs, more eager to hate eachother than see the truth.

Divide and conquer.

As long as the Liberals blame Republicans, and Republicans blame Liberals, the fault lies in us.

In the six years following the greatest swindle in American history, we've lambasted eachother over everything but.

The thieves laugh at our pettiness, so easily played as the statute of limitations runs out.

 

 

 

 

Wed, 05/28/2014 - 13:23 | 4802393 abgary1
abgary1's picture

Every man/woman for him/herself. Morals be damned.

Do NOT follow this link or you will be banned from the site!