The head of a typical large public company in the United States made US$9.7 million in 2012, a 6.5 per cent increase from a year earlier that was aided by a rising stock market, according to an analysis using data from Equilar, an executive pay research firm.
Chief executive pay, which fell for two years during the global financial crisis but rose 24 per cent in 2010 and 6 per cent in 2011, has never been higher.
Companies say they need to pay leaders well so they can attract the best talent, and that this is ultimately in the interest of shareholders. But shareholder activists and some corporate governance experts say many chief executives are being paid far above what is reasonable or what their performance merits.
Pay for all United States workers rose 1.1 per cent in 2010, 1.2 per cent in 2011, and 1.6 per cent last year, not enough to keep up with inflation. The median wage in the US was about US$39,900 in 2012, according to data from the Bureau of Labour Statistics.
After years of pressure from corporate governance activists unhappy about big payouts, many companies have revamped their compensation formulas. They have awarded a bigger chunk of compensation in stock to align pay more closely to performance, become more transparent about how compensation decisions are made, and in some cases promised to claw back pay from fired executives.
Shareholder activists say the changes are a step in the right direction, yet they argue that pay for chief executives remains too high and that there is still too much incentive to focus on short-term results.
The highest paid chief executive was Leslie Moonves of CBS, who made US$60.3 million. He beat the second-place finisher handily: David Zaslav of Discovery Communications, who made US$49.9 million. Five of the 10 highest-paid company heads were from the entertainment and media industry.
For the fourth year in five, health care chiefs received the highest median pay at US$11.1 million, while heads of utilities had the lowest at US$7.5 million.
The median pay for women chief executives was higher than it was for men - US$11.2 million compared with US$9.6 million - although only 3 per cent of the companies analysed were run by women. Irene Rosenfeld of Mondelez International, the snack giant that was spun-off from Kraft Foods last year, was the highest-paid female chief, taking in US$22 million.
The biggest changes in compensation last year came from stock, which increased 17.2 per cent, and from stock options, which declined by 16 per cent.
Shareholders tend to favour stock compensation because it can be tied to figures such as revenue and earnings, whereas the value of stock options depends only on the stock price. Salary and perks rose last year, while bonuses fell. As a proportion of total pay, bonuses accounted for 23.8 per cent, salary 10.4 per cent, and perks 3.8 per cent.
With the economy on steadier footing and the stock market surging, the debate over executive pay is settling into more of a simmer than a boil. Companies cut pay for chief executives in 2008 and 2009 amid investors' anger over the losses they suffered during the financial crisis.
Companies say they are listening to their shareholders' concerns. They point to changes that are meant to tie pay more closely to company performance. For example, they are more often linking stock awards to revenue, earnings and share price targets. But those changing pay structures has hardly silenced the critics.
"If you're making US$10 million a year, you get into a situation where life isn't real anymore," says Eleanor Bloxham, chief executive of the Corporate Governance Alliance.