Our report on executive compensation will only fuel the outrage over corporate greed. In 2011 the chief executives of the 500 biggest companies in the U.S. (as measured by a composite ranking of sales, profits, assets and market value) got a collective pay raise of 16% last year, to $5.2 billion. This compares with a 3% pay raise for the average American worker. The total averages out to $10.5 million apiece. The value realized from exercised stock options and vested stock awards are the main components of total pay, accounting for 61%. The average stock gain was $3.2 million, up from $2.7 last year. Average value of vested stock awards was $3.1 million, up from $2.5. Combined salary and bonus was up an average 8% to $3.5 million.
Click here to see two decades of CEO pay and how this year's CEO pay stacks up to past years.
So much for the moral suasion granted to shareholders last year with the first-ever say-on-pay votes for U.S. public companies. A no vote, already a rare thing, is hardly ever binding. You can see the results of our 11th annual long-term look at performance and pay in our bang-for-the-buck scorecard to see who are America's Best CEOs. We measure the pay of CEOs with at least a six-year tenure against the company’s stock performance versus its peers and the S&P500.
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The top earner in our report is McKesson's John H. Hammergren, with $131 million in total pay. Hammergren drew $6.3 million in salary and bonus, but also realized $112 million from the exercise of vested stock options. The next four top-paid chief executives, also earning most of their pay from exercised stock options or vested stock awards: Forbes Billionaire Ralph Lauren of Ralph Lauren ($67 million); Michael D. Fascitelli of Vornado Realty ($64 million); Richard Kinder of Kinder Morgan ($61 million) and David M. Cote of Honeywell International ($56 million).
We have 17 female CEOs on our list that run these big firms. The highest paid is Irene Rosenfeld of Kraft Foods with $25.4 million it total pay last year. Kraft recently announced its dividing the company to create two public companies before the end of 2012: a global snacks business and a North American grocery business. It plans to change its corporate name to Mondelez International (global snacks business). The North American grocery company will become Kraft Foods Group, retaining the Kraft brand.
We now have five executives who take $1 in annual salary, four are Forbes Billionaires: Oracle's Larry Ellison, Google's Larry Page, Hewlett Packard's Meg Whitman. and Kinder Morgan's Richard Kinder. The other executive is Whole Foods' John Mackey.
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We also broke down average total pay by industry. Drug and Biotech executives clearly like the direction Obamacare is going and earned the most with $18.3 million. They are followed by media ($17.3 million), household and personal products ($15.7 million), restaurants and leisure ($14.4 million) and consumer durables ($13.8 million). At the low end of the pay scale: Utility CEOs earned $6.1 million, followed by software and services ($6.7 million), banking ($7 million), insurance ($7.9 million) and retailing ($8.4 million).
Compensation data is from the latest available proxy statements filed through Mar. 23, 2012.
Components of Compensation
We count compensation when it turns into cash or marketable stock; we do not include the value of options until the executive exercises them. When calculating a chief executive's total compensation for the fiscal year we count the following: salary and cash bonuses; other compensation, such as vested stock grants; and stock gains, the value realized by exercised stock options. We collected the latest available compensation figures reported in companies proxies filed by March 25, 2011.
Salary: Annual base salary earned during the fiscal year.
Bonus: Annual non-equity incentives earned during the fiscal year, and discretionary bonuses.
Other: Includes long-term non-equity incentive payouts, the value realized from vesting of restricted stock and performance shares. Also includes other executive personal benefits, such as premiums for supplemental life insurance, annual medical examinations, tax preparation and financial counseling fees, club memberships, security services and the use of corporate aircraft.
Stock gains: Value realized during the fiscal year by exercising vested options granted in previous years. The gain is the difference between the stock price on the date of exercise and the exercise price of the option.
Top 5 Highest Paid CEOs
1. John Hammergren of McKesson
One-year total compensation ($MIL): $131.2
The highest-paid CEO on this year's report has been CEO of McKesson, a Calif.-based medical supply company, for 13 years. The bulk of 2011 pay came from cashed out stock options with his salary and bonus remaining flat from a year ago. MCK stock was up 20% in fiscal year ending Mar. 31, 2011.
2. Ralph Lauren of Ralph Lauren
One-year total compensation ($MIL): $66.7
A Forbes Billionaire (Net Worth $7.5 billion) is a Bronx native and opened his New York City flagship store in the fall of 2010. He started Polo with $50,000 in 1976. The company now sells clothing, shoes, jewelry, home goods, fragrances.
3. Michael Fascitelli of Vornado Realty
One-year total compensation ($MIL): $64.4**Prior-year figure.
Took over as CEO three years ago, replacing Forbes Billionaire Steven Roth. The real estate investment trust Vornado Realty owns 100 million square feet of office space in New York and Washington, D.C.
4. Richard Kinder of Kinder Morgan
One-year total compensation ($MIL): $60.9****Received $1 in salary.
A Forbes Billionaire (Net Worth $8.2 billion), took his company public again in Feb., 2011. The stock is up 25% since the first trade day. He takes $1 in annual salary with most of his 2011 pay coming from vested shares tied to the offering.
5. David Cote of Honeywell
One-year total compensation ($MIL): $55.8 Cote's bonus ($23.3 million) was tied to Honeywell's 13% sales growth and 19% segment profit growth in 2011. Honeywell's stock was up 2% in 20011 and up 15% year-to-date.
Click here to see the rest of America’s Highest-Paid CEOs