How AP and Equilar calculated CEO pay
For its annual analysis of CEO pay, The Associated Press used data provided by Equilar, an executive data firm.
Equilar examined regulatory filings detailing the pay packages of 340 executives. Equilar looked at companies in the S&P 500 index that filed proxy statements with federal regulators between Jan. 1 and April 30, 2019. To avoid the distortions caused by sign-on bonuses, the sample includes only CEOs in place for at least two years.
To calculate CEO pay, Equilar adds salary, bonus, perks, stock awards, stock option awards, deferred compensation and other pay components that include benefits and perks.
Stock awards can either be time-based, or performance-based, meaning the CEO has to meet certain goals before getting them. Stock options usually give the CEO the right to buy shares in the future at the price they’re trading at when the options are granted. All are meant to tie the CEO’s pay to the company’s performance.
To determine what stock and option awards are worth, Equilar uses the value of an award on the day it’s granted, as recorded in the proxy statement. For options, this includes an estimate of what the award could be worth in the future. Their actual value in the future can vary widely from what the company estimates.
Equilar calculated that the median CEO pay in 2018 was $12 million. That’s the midpoint, meaning half the CEOs made more and half made less.
Here’s a breakdown of 2018 pay compared with 2017 pay. Because the AP looks at median numbers, the components of CEO pay do not add up to the total.
—Base salary: $1.2 million, up 5%
—Bonus, performance-based cash awards: $2.1 million, up 6%
—Perks: $186,698, up 15%
—Stock awards: $6.4 million, up 17%
—Option awards: $0, down 100% (More than half of the companies gave no option awards. The average option award was valued at $2 million.)
—Total: $12 million, up 7%