CEO pay falls, but still 271 times higher than median workers'

CEO pay fell last year from the record levels set in 2021, but many chief executives, including those in financial services, take home more than 200 times the median figures earned by workers at their companies.

That's according to data published Thursday by the AFL-CIO, which cited the average compensation of CEOs at S&P 500 firms as $16.7 million in 2022, down from $18.3 million in 2021. Overall, the pay ratio of CEOs to workers was 271-to-1 — a figure that's also lower than the 350-to-1 ratio seen in 2021, data from AFL-CIO and As You Sow show.

However, a distinction this year is the emerging role of artificial intelligence in pay packages, Fred Redmond, AFL-CIO secretary-treasurer, said in prepared remarks Thursday.

“When looking at this year’s highest paid CEOs — those who received over $100 million in total compensation — we noted that they are all actively working to incorporate artificial intelligence into their business models,” Redmond said. “It’s not just the tech giants like Oracle and Google’s parent Alphabet. It includes companies that recently had their IPOs like the legal services company CS Disco and the human resources company Workday.”

But the standout in AI is Blackstone’s Stephen Schwarzman, who, at $253 million in total comp last year, was the highest-paid CEO in the group’s database, Redmond said.

“It’s almost inconceivable,” he said, adding that Schwarzman has made notable gifts related to AI studies at MIT and Oxford. “He’s betting on the AI revolution, and it’s happening now. It’s going to affect how we work and live, and nearly every company is starting to grapple with its potential to transform our economy.”

Although AI “has the potential to unleash broad based prosperity,” it could alternatively “increase economic inequality and undermine job security,” with as many has 300 million U.S. jobs affected, Redmond said. “We are already seeing AI algorithms being used to determine who is qualified for a job, who is worthy enough for additional medical care, and who can afford to buy a home and where.”

BIG EARNERS

After Schwarzman, the highest-paid financial services CEOs in the Russell 3000 were KKR’s Joseph Bae ($80 million), AIG’s Peter Zaffino ($75 million), Jefferies’ Richard Handler ($57 million), American Express’ Stephen Squeri ($48 million), American Equity Investment Life Holding Co.'s Anant Bhalla ($47 million), PJT Partners’ Paul Taubman ($40 million), Morgan Stanley’s James Gorman ($39 million) and JPMorgan Chase’s Jamie Dimon ($35 million), according to the database.

Among S&P 500 companies, the highest CEO-pay-to-median-salary ratios were at American Express (972:1), AIG (894:1), S&P Global (797:1), Marsh & McLennan (454:1) and JPMorgan Chase (393:1).

SHAREHOLDER APPROVAL

Last year, shareholders voted “no” on say-on-pay proposals at S&P 500 companies nearly 13% of the time, up from just over 4% in 2017, according to a report earlier this year from As You Sow. Such votes are nonbinding, but they can convey investors’ sentiments about compensation they feel is excessive.

While average S&P 500 CEO pay fell last year, median pay increased by just over 3%, according to a report in April by ISS Corporate Solutions. But in financial services, median pay increased by nearly 13%, and that was coupled with declines in median shareholder returns of more than 16%.

“The data shows the opposite of the common perception that CEOs with higher compensation create greater shareholder value. There’s a case to be made that putting more money into making the company sustainable for the long-term rather than overpaying a CEO is the way to increase value for investors,” Leslie Samuelrich, president of Green Century Funds, said in an email. “A forward-thinking compensation policy would be to incentivize corporate leaders/CEOs to reduce the company’s negative environmental impact.”