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<div class="timestamp">April 7, 2012</div>
<h1>In Executive Pay, a Rich Game of Thrones</h1>
<span><h6 class="byline">By NATASHA SINGER</h6></span>
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<p>
IS any C.E.O. worth $1 million a day? </p>
<p>
That’s roughly $42,000 an hour. Or $700 a minute. Or $12 a second. </p>
<p>
Think of it this way: In the time it took to read those words, you
could’ve pocketed $100. Finish this article and — well, you do the math.
</p>
<p>
At <a href="http://topics.nytimes.com/top/news/business/companies/apple_computer_inc/index.html?inline=nyt-org" title="More information about Apple Incorporated" class="meta-org">Apple</a>,
the answer to that question is an emphatic yes, and then some. Not
since Steve Jobs has a chief executive at Apple, or any other public
American corporation, for that matter, been as richly rewarded in stock
as <a href="http://topics.nytimes.com/top/reference/timestopics/people/c/timothy_cook/index.html?inline=nyt-per" title="More articles about Timothy D. Cook." class="meta-per">Timothy D. Cook</a>, who succeeded Mr. Jobs as chief executive last August, a few months before Mr. Jobs died. </p>
<p>
Mr. Cook was paid a cash salary of roughly $900,000 in 2011. On its own,
that would have been a ho-hum paycheck for a top American C.E.O. in
recent years. </p>
<p>
But then came a wild extra, a one-time award, in the form of Apple
stock. It was initially worth a staggering $376.2 million. As of the end
of last week, it was valued at roughly $634 million, reflecting Apple’s
soaring share price. </p>
<p>
Many credit Mr. Cook, along with Mr. Jobs, for Apple’s recent success.
And the company is quick to note that Mr. Cook’s pay package extends
over 10 years. One-half of his stock is scheduled to vest in 2016, and
the other in 2021, provided that Mr. Cook still works for Apple. And, at
a time when some investors seethe over far smaller paychecks — a mere
eight figures is relatively commonplace for top chief executives these
days — Apple’s shareholders are hardly up in arms over the magnitude of
Mr. Cook’s reward. To the contrary, a vast majority voted in favor of
it. </p>
<p>
Of course, most of us can’t begin to wrap our heads around pay figures
like these. An American with a bachelor’s degree, after all, typically
makes $2.3 million, not in a year, but over a lifetime, according to <a title="Summary of Georgetown study, a pdf." href="http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/collegepayoff-summary.pdf">a recent study from Georgetown University</a>. </p>
<p>
Data on C.E.O. compensation in 2011, albeit preliminary, confirm what
many of us already know: the top brass generally do much, much better
than the rest of us, whether times are good or bad. After the ups and
downs of the recent boom-bust years, pay among the 100 best-paid chief
executives at big American corporations held fairly steady in 2011,
according to <a href="http://www.equilar.com/">Equilar</a>, which reviewed C.E.O. compensation for The New York Times. Here are some numbers worth knowing: </p>
<p>
• Among the 100 top-paid C.E.O.s, overall pay last year rose a scant 2 percent from 2010. </p>
<p>
• The median chief executive in this group took home $14.4 million — compared with the <a title="Salary information from the Bureau of Labor Statistics." href="http://www.bls.gov/oes/current/oes_nat.htm">average annual American salary of $45,230</a>. </p>
<p>
• In all, the combined compensation of these 100 C.E.O.s totaled $2.1 billion, the rough equivalent of the <a title="Economic information about Sierra Leone." href="https://www.cia.gov/library/publications/the-world-factbook/geos/sl.html">estimated annual economic output of Sierra Leone</a>. </p>
<p>
The full picture won’t become clear until June or so, when corporate proxy statements will detail the full range of <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/e/executive_pay/index.html?inline=nyt-classifier" title="More articles about executive pay." class="meta-classifier">executive compensation</a>.
But data available as of March 30 suggests that a new elite is emerging
in corporate America: C.E.O.’s who make $10 million-plus a year.
</p>
<p>
Granted, these are chief executives of publicly traded companies, the
kind of businesses anyone can buy into on the stock market. Next to pay
in the rarefied realms of private American capitalism — the
multitrillion-dollar world of hedge funds, <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/p/private_equity/index.html?inline=nyt-classifier" title="More articles about private equity." class="meta-classifier">private equity</a> and the like — these C.E.O.’s might seem like pikers. Top hedge fund managers collectively earned <a title="DealBook article on earnings." href="http://dealbook.nytimes.com/2012/03/29/large-hedge-funds-fared-well-in-2011/">$14.4 billion</a> last year. </p>
<p>
But the Equilar figures also hint at the myriad ways executive
compensation is as tailored as a bespoke suit. It is those custom
details — the one-off huge stock grants, in Mr. Cook’s case, the token
$1 annual salaries or evaporating bonuses in others — that can turn dull
proxy statements into page-turners. </p>
<p>
Mr. Cook is an extreme example of this phenomenon. He is, experts agree,
an outlier — the only chief executive on the Equilar list to pull down a
nine-figure paycheck. His stock award was so valuable, even at its
initial price, that his total compensation eclipsed that of the next
nine C.E.O.’s combined. Those nine included Lawrence J. Ellison of
Oracle, at $77.6 million, a perennial on the best-paid list, and
Philippe P. Dauman, of Viacom, at $43.1 million. </p>
<p>
Aaron Boyd, the director of research at Equilar, the executive
compensation data firm based in Redwood City, Calif., that has reviewed
executive compensation trends annually for Sunday Business, said Mr.
Cook’s pay was unique. </p>
<p>
“The amount he got was historic to such a degree that it skews the numbers,” Mr. Boyd said. </p>
<p>
BUT Apple was not the only special case. Consider J. C. Penney, whose
new chief executive, Ronald B. Johnson, came in third on the top 100
list, with total compensation of $53.3 million. </p>
<p>
Why? Last year, Mr. Johnson left his position as senior vice president
of retail at Apple, along with Apple stock worth $101 million at the
time that had not yet vested. So, as part of his pay package, J.C.
Penney gave Mr. Johnson a one-time stock award worth $52.6 million. (As
of the end of last week, his Apple stock would have been worth about
$159 million. His Penney stock was worth $58 million.) </p>
<p>
Last year’s other top earners included Stephen I. Chazen ($31.7 million)
of Occidental Petroleum; Gregory Q. Brown ($29.3 million) of Motorola
Solutions, and Howard D. Schultz ($16.1 million) of Starbucks. </p>
<p>
Analysts say the uptick in C.E.O. pay is a sign that corporations are returning to business as usual after the last <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier" title="More articles about the recession." class="meta-classifier">recession</a>.
When the economy soured, executive pay fell sharply at many companies,
though not as much as many ordinary Americans might have hoped. With the
recovery in 2010, pay then skyrocketed. Now it’s stabilizing,
suggesting, perhaps, that corporate boards see more predictable economic
times ahead. </p>
<p>
“On average, pay levels have moderated,” said Doug Friske, the global head of executive compensation consulting at <a title="Company information." href="http://www.towerswatson.com/">Towers Watson, a human resource consulting firm</a> in New York. “Now we are seeing normalization.” </p>
<p>
Corporate boards also seem to be acknowledging criticism of executive
pay from shareholders and the public. Some companies have reduced
discretionary bonuses and linked executive pay more closely to
performance metrics like revenue and share price. Last year, companies
also began to hold shareholder votes on executive pay packages, <a title="Previous New York Times article on the topic." href="http://dealbook.nytimes.com/2011/01/25/s-e-c-adopts-say-on-pay-rules/"> so-called “say on pay” polls required by Dodd-Frank</a>, the Wall Street reform law. </p>
<p>
Corporate America hasn’t entirely embraced reform. Some companies and
industry groups have asked the Securities and Exchange Commission to
jettison — <a title="Industry letter to S.E.C." href="http://www.sec.gov/comments/df-title-ix/executive-compensation/executivecompensation-84.pdf">or at least delay putting in place</a>
— a provision in the Dodd-Frank law that would require companies to
disclose the ratio of C.E.O. pay to median employee pay, the kind of
statistic that could grab headlines in this era of the 1 percent.
</p>
<p>
The 100 highest earners of 2011 have one thing in common, however. Although they could all rank among the <a title="Previous New York Times article on the topic." href="http://www.nytimes.com/2012/01/15/business/the-1-percent-paint-a-more-nuanced-portrait-of-the-rich.html">1 percent — households that bring in $380,000 or more</a> — they actually belong in a more exclusive bracket: people with more than $10 million in pay. </p>
<p>
But the C.E.O. wealth is hardly trickling down. During the 2010
recovery, the top 1 percent captured 93 percent of the income gains,
while the incomes of the 99 percent essentially remained flat, <a title="Read the study." href="http://bit.ly/xWBGLQ">according to a study</a> by <a title="About Professor Saez." href="http://bit.ly/1tGZnh">Emmanuel Saez, an economics professor at the University of California, Berkeley</a>. </p>
<p>
In 2011, the median weekly earnings for full-time wage and salary
workers in the United States rose only about 1 percent, to $756, from
$747 in 2010, according to <a title="Labor Bureau data." href="http://www.bls.gov/news.release/wkyeng.t07.htm">data from the Bureau of Labor Statistics</a>. In constant dollars, wages fell a little more than 2 percent. </p>
<p>
The C-suite and the shop floor have never been further apart, said
Brandon Rees, the deputy director of the A.F.L.-C.I.O. office of
investment. </p>
<p>
“American workers are having to make do with less,” Mr. Rees said, “while C.E.O.s have never had it better.” </p>
<p>
Equilar analyzed base salaries, cash bonuses, perks, stock awards and
options for the 100 most highly compensated executives at public
companies that had revenue of more than $5 billion and had filed their
proxy statements by March 30. (The study excluded severance pay, changes
in pension values and stock awarded in previous years that vested in
2011.) </p>
<p>
One standout on the list was Vikram S. Pandit, the chief executive of
Citigroup. After the company was bailed out by taxpayers in 2009, <a title="Previous New York Times story on the topic." href="http://www.nytimes.com/2010/09/25/business/25citi.html">Mr. Pandit pledged to work for</a> $1 a year until the bank returned to profitability. </p>
<p>
Citigroup has since repaid its bailout money, and the board has restored
Mr. Pandit’s pay. It amounted to $14.9 million last year, putting Mr.
Pandit in 45th place on Equilar’s list. Citigroup’s longtime
shareholders are still waiting for their payday: while the company’s net
income rose 3 percent last year, Equilar said; its share price fell 44
percent. </p>
<p>
New “say on pay” votes, though nonbinding, have caused some companies to
make a greater proportion of pay contingent on chief executives’
achievement of rigorous performance goals. Some companies have even
eliminated stock option awards — the grants of stock that executives are
able to buy at a fixed price — in favor of full-value stock awards that
vest only if executives meet specified goals, said Carol Bowie, head of
Americas research at Institutional Shareholder Services, a proxy
consulting firm for institutional investors. </p>
<p>
“We are definitely seeing a trend toward more performance-based pay,”
Ms. Bowie said. “It remains to be seen if performance follows.” </p>
<p>
At Hewlett-Packard, for instance, shareholders voted in March 2011 to
reject the company’s executive compensation plan. The board eventually
responded to criticism over the company’s multimillion-dollar executive
severance packages. The departure last year of Léo Apotheker, who had
served as C.E.O. for 11 months, for example, cost H.P. shareholders
about $30 million, according to a report from I.S.S. </p>
<p>
When H.P.’s board subsequently chose Meg Whitman as the new C.E.O., it
took some steps to mollify shareholders by giving her a
performance-based compensation package. The board offered her a base
salary of $1, no cash bonus, no stock awards and a grant of options to
purchase 1.9 million shares of H.P. stock. </p>
<p>
Although that amounted to compensation of about $16.5 million, ranking
Ms. Whitman 35th on the Equilar list, she will have to meet certain
conditions for all of the stock to vest. If she remains employed at
H.P., she can exercise her option to buy 100,000 shares each year for
the next three years. In addition, 800,000 shares will vest if H.P.’s
share price increases by 20 percent under her stewardship, and another
800,000 will vest if the stock increases by 40 percent. </p>
<p>
THE rest of the top earners list reads like an A-list of corporate
titans, from Robert A. Iger of Walt Disney, ranked seventh, with pay of
$31.4 million, to William C. Weldon of Johnson & Johnson, ranked
13th, with $23.4 million. <a title="Previous New York Times article on the topic." href="http://www.nytimes.com/2012/02/22/business/j-j-chief-to-resign-one-role.html">(Mr. Weldon plans to step down as chief later this month</a>; he will stay on as chairman.) </p>
<p>
Rupert Murdoch of the News Corporation took 10th place, with
compensation of $29.4 million — a 75 percent increase from 2010. In a
year when <a title="Previous New York Times article on the topic." href="http://www.nytimes.com/2012/04/04/world/europe/james-murdoch-steps-down-from-british-broadcaster.html">the News Corporation and Mr. Murdoch’s son James</a>
were embroiled in a scandal over phone hacking, the elder Mr. Murdoch
earned a cash bonus of $12.5 million. That is because the company did
well financially, analysts said, even if its reputation plummeted.
</p>
<p>
“Financially, they exceeded their target,” said Mr. Boyd of Equilar.
“But from a publicity standpoint, News Corporation has taken a hit over
the last year and a half.” </p>
<p>
Also among the top 10, David M. Cote, the chief executive of Honeywell,
received total compensation of $35.3 million, putting him in fifth
place. Honeywell tends to dole out a huge bonus every other year. Last
year, Mr. Cote’s bonus was $23.3 million. </p>
<p>
Clarence P. Cazalot Jr., the chief executive of Marathon Oil, received
$29.9 million, an increase of 239 percent from the previous year. That
put him in eighth place. Mr. Cazalot received a cash bonus of $21.8
million, the second-highest cash bonus, a majority of which came from
accelerated payouts for spinning off a company unit, the Marathon
Petroleum Corporation. </p>
<p>
Next, Alan R. Mulally, who helped turn around Ford, took ninth place,
with compensation of $29.5 million. Although Ford’s share price fell
nearly 36 percent last year, its net income increased 208 percent.
</p>
<p>
Elsewhere, Fabrizio Freda, the chief executive of the Estée Lauder
Companies, made a big leap. He ranked 18th on the Equilar list, up from
54th place on a comparable list in 2010. He received compensation of
nearly $21 million in 2011, a 51 percent increase. Mr. Freda is the
first real outsider — and only the second person outside the Lauder
family — to run the beauty products empire. Under his stewardship last
year, Lauder’s net income increased 47 percent, while its total
shareholder return, the change in share price plus dividends paid,
increased 90 percent. </p>
<p>
Taken alone, Mr. Freda’s compensation may seem high for a company with
revenue of nearly $9 billion, said Robin Ferracone, the executive
chairwoman and founder of <a title="The firm’s Web site." href="http://www.farient.com/">Farient Advisors, an executive compensation and performance consulting firm</a>.
But, given the company’s stellar performance and the fact that Lauder
fits more in the luxury goods category than the toiletries category, she
said, his compensation seemed appropriate. </p>
<p>
“The high-fashion industry tends to pay more than the big industrials,”
Ms. Ferracone said. “It’s going to look fine to shareholders.” </p>
<p>
BUT investors, among them employees with <a href="http://topics.nytimes.com/your-money/retirement/401ks-and-similar-plans/index.html?inline=nyt-classifier" title="More articles about 401(k)'s and similar Plans." class="meta-classifier">401(k)</a>
plans, may want additional information to gain more context about
whether executive pay packages are reasonable and appropriate. </p>
<p>
The A.F.L.-C.I.O. has urged the S.E.C. to put into effect the provision
in Dodd-Frank requiring companies to disclose the ratio of chief
executive pay to their employees’ median pay. That would give
shareholders insight into compensation practices, said Mr. Rees of the
labor federation, along with the ability to compare it to those of other
companies. </p>
<p>
“It puts C.E.O. pay in perspective,” he said. “It’s material to investors.” </p>
<p>
Don’t hold your breath. The requirement isn’t likely to come into effect
any time soon, because many companies have complained to the S.E.C.
that it would be a burden to comply with it, said Ms. Bowie of I.S.S.
</p>
<p>
“There’s been a lot of pushback from companies on that,” she said. </p>
<p>
Mary L. Schapiro, the chairwoman of the S.E.C., said at <a title="Transcript of Ms. Schapiro’s comments." href="http://www.cq.com/doc/congressionaltranscripts-4040705?wr=RDlYTlRja3lSajUyWkdKQm9TbzZ3dw">a Congressional hearing last month</a> that the commission was trying to work through “a lot of technical issues” on how companies might calculate this. </p>
<p>
The agency has not yet set a date for companies to comply, John Nester, a spokesman for the S.E.C, said on Thursday. </p>
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