In case there was any doubt that the fat cats are getting richer, a new AP analysis confirms it.
CEO pay at public companies increased 6% last year, along with companies’ revenues. The average payout in 2011 was $9.6 million, the highest rate since the AP began tracking executive pay in 2006.
It would take 636 years for an individual earning minimum wage to earn $9.6 million, and 244 years for a worker with the average American paycheck ($39,300) to take home what the average CEO makes in a year, the AP pointed out.
Sadly for executives their cash bonuses were “trimmed” in favor of more stock handouts — an average of $3.6 million in stock — in an effort to tie the chief’s performance to company performance.
High executive pay came under scrutiny in the fallout from the financial crisis in 2008, and Washington has battled with Wall Street to implement new rules and regulations, such as Dodd-Frank. From the AP:
Beginning last year, Dodd-Frank required public companies to let shareholders vote on whether they approve of the top executives’ pay packages. The votes are advisory, so companies don’t have to take back even a penny if shareholders give them the thumbs-down. But shame has proved a powerful motivator.
It got Hewlett-Packard to change its ways. After an embarrassing “no” vote last year on the 2010 pay packages, including nearly $24 million for ousted CEO Mark Hurd, the company huddled with more than 200 investment firms and major shareholders, then threw out its old pay formula. New CEO Meg Whitman is getting $1 a year in salary and no guaranteed bonus for 2011. Nearly all her pay is in stock options that could be worth $16 million, but only if the share price goes up.
To be sure, shareholders aren’t voting en masse against executive pay. Instead, they seem to be saving “no” votes for the executives they deem most egregious.
Of more than 3,000 U.S. companies that held votes in 2011, only 43 got rejections, according to ISS. But the mere presence of the “say on pay” vote is triggering change, shareholder activists say.