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By Che Odom
May 17 — The average pay of an S&P 500 chief executive officer decreased to $12.4 million in 2015 from $13.5 million in 2014, largely because of a decline in future pension benefits rather than a fall in salary or bonuses.
The AFL-CIO released the data May 17 when it unveiled the 2016 edition of its annual Executive PayWatch .
According to PayWatch, the average S&P 500 CEO was paid 335 times as much as the average nonsupervisory worker in 2015. In 2014, the ratio was greater: 373 to 1, up from 331 to 1 in 2013.
The disparity in pay is a growing political issue that can no longer be ignored by companies, Heather Slavkin Corzo, director of the AFL-CIO's Office of Investment, told Bloomberg BNA.
“We do see more concern about CEO pay from investors and the public,” after 19 years of PayWatch reports, Slavkin Corzo said.
The AFL-CIO culled through securities filings to calculate executive compensation and used Labor Department statistics to determine the pay of an average nonsupervisory worker in the U.S.
Individual companies will begin reporting their own ratios beginning on or after Jan. 1, 2017, following the Securities and Exchange Commission's adoption of its pay ratio rule in August 2015 (13 CARE 1756, 8/7/15). The SEC rule requires public companies to disclose the ratio of their CEO's compensation to the median compensation of their employees.
While the AFL-CIO and other labor unions pushed for the requirement, the U.S. Chamber of Commerce, corporations and other business groups say it is little more than a tool to shame executives.
“The more that ratios are used to embarrass businesses, the more we will see the continued decline of public companies in the U.S.,” Tom Quaadman, senior vice president of the Chamber's Center for Capital Markets Competitiveness, told Bloomberg BNA.
Executive pay is set by boards through a “dialogue of investors, directors and management,” Quaadman said. He added that compensation packages are a method used by companies and their shareholders to acquire the talent needed to run a successful business.
“Painting with a broad brush misses these points and what is needed for the long-term success of a business and its shareholders,” he said.
This year, the AFL-CIO placed emphasis on companies that seek to avoid U.S. income taxes by leaving profits overseas. CEOs at the Top 25 companies with the highest levels of such “unpatriated profits” are paid 25 percent more than the rest of the S&P 500, Slavkin Corzo said.
“There is a connection,” she said.
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Executive PayWatch is available at http://www.aflcio.org/Corporate-Watch/Paywatch-2016 .
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