What CEOs REALLY get paid: Pay packages are laid bare in new transparency rules

Public companies are disclosing how much money their top executives actually raised last year after factoring in their stock options, using an SEC-approved approach called “compensation actually paid.”

The new money meter was designed to provide a more accurate view of the pay disclosures for top executives of various companies, beyond the temporary numbers taken from a moment in time that inverters have been provided for years.

The old approach, which is still in use by most companies, currently requires companies to only show top executive pay as valued when received.

Now, however, at least 65 high-profile companies have adopted the practice, which attempts to close the gap between the packages agreed to at the start of the year and the number actually delivered, by tabulating the earnings on stock awards that comprise executive pay packages.

The results, first reported by the Wall Street Journal, are remarkably surprising, with several CEOs of companies including Indiana-based pharmaceutical giant Eli Lilly and Huggies maker Kimberly-Clark Corp. sporting earnings that in many cases they are two to two. even three times more than previously known.

Of those who adopted the new measure as of Monday, 23 are in the S&P 500, a respected stock index with 500 of some of the largest publicly traded corporations in the country.

Included in that faction are Indiana-based Eli Lilly, diaper giant Kimberly-Clark and oil kingpin Schlumberger Ltd, all of which enjoyed steep gains in 2022.

Later, the company’s top executives reaped the rewards of this success, with eye-popping salary packages now laid bare by the new rules, which the Journal reported were first adopted in August.

While not mandatory, the approach was designed to help investors better understand how well executive pay correlates with company performance, while resisters have argued that the new method is unnecessarily expensive. and complicated.

This didn’t stop Schlumberger from adopting the practice, however, with the Journal revealing on Sunday that the company’s French CEO Olivier Le Peuch, 60, took home an additional $24 million in 2022 under a power of attorney filed earlier. of this year.

According to the Journal report, the difference was due to stock growth enjoyed by the Houston-based oilfield service last year, which has seen its the stock price rose more than 33 percent from this date in 2022, and more than 70 percent that year alone.

The sharp rise in the company’s share price caused the value of the shares Le Peuch had received in prior years to rise by $15.4 million during the year, adding to the executive’s already known annual compensation. of $15.7 million.

That being said, Le Peuch’s The equity awards, valued at $12 million when drafted in January 2022, increased in value by about $8.1 million during the year, for a total of just under $24 million in total compensation.

Those equity awards include grants made in 2019 when Le Peuch became the oil company’s chief executive, a spokesperson confirmed to the Journal Sunday, as the paper published the actual pay packages for Le Peuch and several others.

The increase in capital can be attributed to the sharp increase in the company’s share price, a fact also enjoyed by several other CEOs who managed to weather current market woes and saw their companies’ market assessment rise. .

The company behind Huggies disposable diapers, also based in Texas, was among those that achieved such success, with Kimberly-Clark Corp. reports actual compensation of $23.4 million for its chief executive, Michael Hsu, nearly $10 million more than the executive’s previously known pay package of $14.6 million.

In Hsu’s case, however, the difference came from the new stock and option grants the CEO received last year, which, like Le Peuch, also rose at the end of the year thanks to the company’s earnings performance. company.

In a statement to the Journal, the company confirmed Hsu’s compensation, as well as the company’s reported net income achieved in 2022, equal to $1.9 billion, which was about 6.6 percent more than the previous year.

Downplaying the gains by stating that the new pay measure “fluctuates due to stock price and levels of projected and actual achievement of performance targets,” a Kimberly-Clark spokesperson added that $100 invested in the company would have returned only about $109 over these three years, as opposed to the estimated $131 for funds invested in similar companies.

The most pronounced disparity, however, came from Eli Lilly & Co., an American pharmaceutical company with offices in 18 countries that enjoyed a 22 percent rise in share price last year.

Additionally, the company’s stock price rose an even steeper 32 percent over the course of 2022, leaving CEO David Ricks with an additional $43 million in pay to enjoy, added to the $21.4 million tabulated according to the traditional calculation.

Under the new compensation measure actually paid, Rick’s true earnings were $64.1 million, serving as one of the highest CEO compensation in the country, behind Warner Bros. Discovery’s David Zaslav, who was pays $246 million annually. , and Amazon’s Andy Jassy, ​​who in 2022 was paid $212.7 million.

None of those companies have adopted the new practice so far, and many say it’s too expensive and complicated to be effective.

Also, the stock price and the new compensation measure don’t always move in tandem.