CEO pay in 2015 tamed by bond yields, Fed expectations

Tue Jun 14, 2016 2:31pm EDT
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By Sai Sachin R

(Reuters) - Chief executives of the biggest U.S. corporations saw their pay rise in 2015 at the slowest rate in seven years, but it's not because their boards were suddenly getting tough.

The main cause was something far more arcane: bond yields and interest rates.

The nominal amounts set aside by companies to cover pensions fell substantially last year, a result of rising bond yields and anticipation of the U.S. Federal Reserve's first interest-rate hike in nearly a decade.

The smaller pension component - a theoretical amount, to be paid in the future - has eaten into the value of total compensation packages and muddied the closely scrutinized relationship between company performance and executive pay.

"It's the smallest pay rise in a long time but that doesn't mean that CEOs weren't bringing home more money," said John Roe, head of advisory at ISS Corporate Solutions (ICS).

"The total number doesn't necessarily tell the whole story."

At 0.1 percent, the median pay rise in 2015 for the CEOs of more than 300 of the S&P 500 companies was the smallest since the financial crisis and a sharp decline from the 12.9 percent hike of 2014, data from ICS shows.

The median total pay package was $11.3 million, according to ICS.   Continued...

A combination photo shows Jeff Immelt (L), Chairman & CEO of GE, Marillyn Hewson (C), Chairman, President and CEO of Lockheed Martin, and Leslie Moonves (R), President and Chief Executive Officer of CBS Corporation, in file photos.  REUTERS/File Photos