CEO pay hikes facing greater shareholder resistance

June 16, 2022

Investors of major US companies reject large executive packages

Large CEO pay hikes are coming under increased scrutiny with investors at major US companies rejecting generous executive pay packages in shareholders' votes in the past year.

According to Minerva data, dissent has radically increased among remuneration with 2020 seeing average shareholder dissent of 6.9% in 2020 before a large spike to 8.3% in 2021.

Correlation with this data has seen multiple defeated remuneration reports and policies. Informa had 62.1% dissent for its remuneration report whilst Rio Tinto had its remuneration report (UK Law) receive 62.2% dissent.

There have been a number of high-profile cases of CEO pay hikes being defeated at investor meetings.

For instance, Investors at Intel’s annual shareholder meeting voted against supporting a compensation package for Intel CEO Pat Gelsinger that would have included a payout of as much as $178.6m. This followed shareholders having vetoed a $52.6m retention bonus for JPMorgan Chase CEO Jamie Dimon.

As the pandemic sent the globe into a financial crisis, US-based CEOs managed to increase their median pay by a record 19% increase in 2021. Meanwhile, base salaries were flat at the median and the grant-date value of long-term incentives (LTI) increased by 11%.

In contrast to these statistics, the average hourly wage in the US rose 4.7% last year, according to the US Labor Department. This is strikingly different to executives within the same industry.

These differences in pay have created major dissatisfaction within the workplace and has seen investors reject generous executive pay packages in shareholder votes.

In fact, some CEOs in 2020 made as much as $200m in a single year as company boards gave big grants of stock to leaders navigating businesses through the pandemic.

Retention bonuses – like the one tabled for JPMorgan’s Jamie Dimon – are often made in the form of stock and worth millions, and are designed to motivate executives to work harder amid new challenges, including high inflation and supply-chain disruptions.

The wage gaps in the workforce have elevated dissatisfaction levels and have created what is now known as the ‘Great Resignation’ which has seen more than four million resignations in April 2021, according to the US Bureau of Labor Statistics.