Bank of America’s Brian Moynihan was the top-paid CEO last year among companies based in the Charlotte area, according to the Observer’s annual review of executive pay.
Moynihan took the top spot in a year in which his $13.7 million in total pay dipped slightly from the previous year, according to the analysis of securities filings. But his pay topped the list in a year when some of his peers didn’t receive the one-time stock grants that boosted their compensation in the previous year.
While the median pay for the largest Charlotte-area companies dropped a bit, the gap between CEO pay and that of the average worker remains large. The median pay for Charlotte-area chief executives was 161 times more than the median compensation for workers statewide.
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Overall, the Observer analysis of CEO pay at the 25 largest publicly traded companies in the Charlotte region found the executives received median compensation of $5.3 million last year, down 15 percent from the previous year. That’s made up of salary, stock, options, bonuses and perks such as using the corporate jet.
In 2014, the median pay package was $6.2 million for the same 25 companies. The median represents the midpoint, with half the CEOs earning more and half less.
Some of the CEOs earned less in 2015 because they didn’t receive large, one-time grants of stock or options like those they were awarded in 2014. For example, in fiscal 2014 Susan DeVore of Premier Inc. got stock and option grants valued at $22.4 million tied to the company’s initial public offering, while Bojangles’ board awarded CEO Clifton Rutledge $3 million worth of stock options when he was hired. Neither award was repeated, causing their total pay to dip steeply.
According to the N.C. Commerce Department, the median wage for workers last year in North Carolina was $32,510.
The 161-to-1 ratio of CEO pay to worker pay is down from 2014, when it reached 192-to-1 at the same 25 companies.
The Observer’s findings come at a time when income inequality figures prominently in the presidential race. Democratic presidential candidate Bernie Sanders made income inequality one of the central tenets of his campaign, blasting companies for increasing wages at the top while pay for ordinary workers has stagnated.
Presumptive Democratic nominee Hillary Clinton has also taken up the attack line, criticizing CEOs for making hundreds of times what the average worker takes home. And her rival, Republican Donald Trump, struck a populist tone and called rising CEO salaries “disgraceful” and a “complete joke” last year.
The AFL-CIO tracks CEO pay with its annual “Executive Paywatch” feature. Nationally, the union found pay for chief executives at S&P 500 companies averaged $12.4 million, or 335 times more than the average worker.
“We know that raising wages and income inequality are at the top of people’s minds,” said Heather Slavkin Corzo, director of the AFL-CIO’s office of investment. “We have a concentration of wealth and power in the hands of the corporate executive class and Wall Street.”
And though the ratio was slightly higher in 2014 (373-to-1), Corzo said it’s too soon to say there’s a trend of the gap shrinking.
“We see shifts that happen year-to-year,” said Corzo. “A lot of it is related, oftentimes to the stock market’s performance.”
In their securities filings, companies typically say their CEO pay is based on executive performance and comparisons with other companies. Salary is typically one of the smaller portions of a compensation package, while much larger parts are comprised of company shares or stock options. Those are often tied to performance targets the company must meet before collecting a payout.
For example, at Mooresville-based Lowe’s, CEO Robert Niblock’s annual bonus is tied to the company’s earnings, total sales and “leadership effectiveness.” His stock and option grants are also tied to measures such as remaining at the company for three years and whether the company hits financial targets set by the board of directors.
“Lowe’s CEO pay has historically been and continues to be strongly aligned with the Company’s performance and shareholder interests,” the company wrote in its annual proxy report. For 2016, a portion of Niblock’s pay will be tied to the company’s total shareholder return, a condition meant to tie compensation more directly to results for investors.
More disclosure is coming
Compensation advisory firm Equilar and The New York Times found the 200 highest-paid CEOs received a median pay package of $16.6 million last year. That was a 5 percent increase from 2014.
Charles Elson, a University of Delaware professor who specializes in corporate governance and executive pay, said this year’s national trend of higher executive pay wasn’t a surprise.
“This year is basically a repeat of the year before,” said Elson. He said the steady march up is a product of the way most companies set the boss’s compensation, with a committee of directors looking at self-designated peer companies and aiming to get their CEO’s pay somewhere near or above the median.
“When pay is determined on the basis of what someone else is getting at another company and it’s targeting the median, it’s going to go up every year,” said Elson.
One factor that could change things: A new rule from the Securities and Exchange Commission that’s set to go into effect next year will require firms to disclose the ratio of their CEO’s pay to the median worker pay at their company. Proponents believe companies could be shamed into moderating pay for executives that is hundreds of times what their average worker makes.
“It’s going to be an embarrassing number for many companies,” said Elson.
In addition to salaries, bonuses, stock and option awards, CEO pay packages typically include perks. Those can range from $63,099 for use of demonstration cars (Scott Smith, CEO of Sonic Automotive) to private use of the corporate jet ($114,411 for John Williams of Domtar) to relocation costs for a new CEO ($21,903 for Gerardo Lopez, hired this year at Extended Stay).
Moynihan climbed to the top in the rankings in a year in which Bank of America, the largest company in the city by revenue, saw improvement in its earnings after years of taking big legal charges in the aftermath of the financial crisis. The bank posted a profit of $15.89 billion in 2015 – three times its 2014 earnings and the highest since a record $21 billion in 2006.
The bank received approval from the Federal Reserve last month to raise its quarterly dividend to 7.5 cents per share, but its stock price continues to struggle. It was down 6 percent last year and has fallen almost 22 percent this year, hurt most recently by Great Britain’s vote to exit the European Union.
In its proxy filing, Bank of America says it has a “pay-for-performance compensation philosophy” that includes the use of deferred stock awards that encourage a “long-term focus on generating sustainable results for our stockholders.” Except for $1.5 million in salary, most of Moynihan’s pay was in performance-based stock in 2015. He received no bonus.
Rutledge, Bojangles’ chief executive, came in at No. 25 on this year’s list, and was the only CEO on the list not to top the $1 million mark. He brought in $965,874.
Staff writers Katherine Peralta and Deon Roberts contributed.
How we did the story
Each year, publicly traded companies are required to file details of how much they pay their top executives and allow shareholders to take a non-binding vote on executive compensation. The Observer examined annual filings from the 25 largest publicly traded companies in the region to glean details of CEO pay at each. Under Securities and Exchange Commission guidelines, companies are required to list compensation accrued during a particular year. That means, for example, that a bonus received in 2015 for work in 2014 would be counted in 2015 compensation.
Depending on how a company performs over time, the ultimate value of stock and options awards might be different than their value at the time they are granted. If a company does not meet performance targets, a CEO might not receive all the stock that was awarded.