NEW YORK--(BUSINESS WIRE)--Over the past decade, S&P 500 CEO pay has grown by an average of 2 to 6 percent year over year. Analysis by executive compensation consulting firm Pay Governance reveals that these increases are supported by, and correlate to, strong gains in total shareholder return. And while CEO pay raises decelerated to 3 percent for 2018, Pay Governance expects them to return to mid- to high-single digits in 2020 as a result of a strong 2019 performance and substantially positive TSR in 2019.
“In certain high-growth industries and high-performing companies, executives may experience continually increasing growth in total compensation in 2020, while executives in slow-growth industries or low-performing companies might see minimal or no increases,” said Pay Governance Consultant Brian Wilby.
On the other hand, there isn’t much room for growth when it comes to performance share plan usage. According to Pay Governance, 94 percent of S&P 500 companies now have this model. This can largely be attributed to the introduction of Say on Pay and preferences toward performance-based long-term incentive systems in lieu of stock options.
“That said, we would not be surprised to see stability in the use of stock options,” said Pay Governance Managing Partner Aubrey Bout. “We noticed that many companies made stock option grants during the depth of the 2009 Great Recession, likely because stock options provided a direct linkage to share price improvements and an opportunity for significant upside leverage, as well as the difficulty in setting multi-year goals at the time.”
Pay Governance continues to monitor corporate pay, shareholder return, other metrics and how they interact to form actionable trends. The firm advises public company compensation committees on setting pay opportunity values based on competitive market data and assessing after-the-fact pay-for-performance using realizable pay and other appropriate methodologies.
Pay Governance LLC is an independent consulting firm focused on delivering advisory services to compensation committees. The consultancy also advises the management of companies in situations in which the firm does not serve as the independent committee advisor. Pay Governance has locations throughout the United States in New York, Boston, Detroit, Philadelphia, Pittsburgh, Chicago, St. Louis, Dallas, Cleveland, Charlotte, St. Petersburg, San Francisco and Los Angeles. The firm also has strategic affiliate relationships with Pay Governance Japan and Pay Governance Korea. For more information, visit www.paygovernance.com.