Median CEO pay for the largest 500 US companies by revenue (the Equilar 500) was up 6.1% in 2016, from $10.4 to $11 million, according to Equilar's latest CEO Pay Trends report. All sectors other than health care and financial services saw an increase in total pay (although health care continued to report the highest median pay at $13.3 million). The study included the following highlights:
- Although base pay remains stable at about 2.5%-3% increase per year, companies are increasingly considering eliminating annual "merit" increases for CEOs in favor of more periodic adjustments based on market movement or other factors. Annual incentive payments in 2016 remained slightly below the 2014 levels at the median. However, the report indicates that the median payout as a percentage of target climbed by 4.9 percentage points to 113.4%.
- Although many stakeholders continue to maintain that stock options still have a place in well-designed incentive plans, the trend away from them continues, with options prevalence down by 3% (50% of Equilar 500 CEOs received options in 2016 compared to a high of 55% in 2014); performance award prevalence was up by 4.1% in 2016. Options remain common in certain industries such as Basic Materials (69%) and healthcare (65.9%) where stock price may be more volatile.
- A portfolio approach of long-term incentive vehicles (granting a mix of either options and performance awards; restricted stock on performance awards; or stock options, restricted stock and performance awards) was the most common equity approach in 2016, reflecting the growth in restricted stock usage (previously, the most common approach was a combination of options and performance awards). In 2016, restricted stock increased by 9.3% in median grant date fair value, although the share of CEOs receiving them (54%) was relatively unchanged from 2014.