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CEO pay rose a record 19% in 2021, while employees saw paltry raises

April 1, 2022, 11:59 AM UTC

Don’t shed any tears for CEOs who took a pay cut in 2020 as the pandemic ravaged businesses. Last year, corporate America rewarded its CEOs handsomely for steering their companies through the worst of the COVID-19 pandemic, according to data shared exclusively with Fortune.

An analysis of 2021 executive pay, conducted by Compensation Advisory Partners (CAP), found that the median total CEO compensation at the 50 companies that have already filed proxy statements, shot up by a record 19%. In contrast, the average hourly wage in the U.S. rose 4.7% last year, according to the Labor Department—not enough to even keep up with inflation.

Some CEOs were awarded especially high pay packages—consisting of salary, cash bonuses, and stock awards—including Apple CEO Tim Cook, whose $99 million in compensation is nearly 1,400 times the average company employee’s, andDisney CEO Bob Chapek, whose overall package doubled to $32.5 million.

Performance-driven components, such as cash bonuses and stock awards, made up the bulk of CEOs’ pay increases, while salaries stayed largely the same. Some CEOs took temporary pay cuts or forwent salaries altogether.

But with a roaring stock market—the S&P 500 rose 27% last year—and an uptick in profits at many companies, CEOs cashed in on merit-based financial incentives.

“[Boards] weren’t expecting such a bounce back,” says CAP principal Lauren Peek.

Compensation packages for fiscal 2021 were set in the fall of 2020, before vaccines were developed, and were driven by two main factors: a doubtful economic rebound and the concerning optics of a CEO salary increase as employees bore the financial brunt of the pandemic. To circumvent both issues, boards increased longer-term incentives, such as stock awards, kept salaries relatively unchanged, and made a higher share of cash compensation contingent on hitting performance goals.

George Oliver, CEO at Johnson Controls, saw his base pay of $1.5 million temporarily cut by 10% in 2020. But last year, his cash bonus doubled to $4.2 million, according to the company’s proxy filing. Similarly, at med-tech firm Becton, Dickinson and Co., CEO Tom Polen’s 22% pay increase to $14.2 million was largely due to a cash bonus of $2.4 million, more than double 2020’s bonus.

Some of the big paydays were also caused by sign-on bonuses, such as that of Walgreens Boots Alliance CEO Rosalind Brewer, who received $24.5 million in stock and cash incentives. At Tyson Foods, CEO Donnie King’s base salary represented just 13%, or $1.2 million, of his total $9 million pay package.

And there were a few CEOs who took a pay cut last year. Steven Collis, CEO of drug distributor AmerisourceBergen Corp., saw his total compensation package rise only 4% in reaction to shareholder displeasure over the company’s $6.4 billion settlement for its role in the opioid crisis.

At times, shareholders have balked at high packages even when a company is performing well under its CEO. Apple has thrived under Cook’s leadership, but his 2021 compensation, which was six times as much as 2020’s, mostly owing to a large stock award, prompted the shareholder advisory firm Institutional Shareholder Services to question the “design and magnitude” of Cook’s package, including $712,000 in private jet travel.

One component of CEO pay that’s gained traction in 2021 is diversity and inclusion targets. Roughly half of the 50 early filers that CAP analyzed pegged a portion of CEO bonuses to ESG (environmental, social, and governance impact) goals, up from 30% two years earlier. “A lot of companies are feeling pressure to include that,” notes Peek.

The 50 companies CAP analyzed come from a broad cross section of American industry and include Apple, Starbucks, Walgreens Boots Alliance, Visa, Walt Disney, Becton, Dickinson, and Johnson Controls. CAP says that early filers’ compensation trends have historically proved to be representative of the overall compensation trends among publicly listed companies, most of which have fiscal years that end with the calendar year.

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