06/17/2024 – 12:58
The salaries of executives at large American companies are rising much faster than the average pay of private sector workers, a disparity that occurs without objection from shareholders, seduced by current stock prices and greater transparency.
Between 2017 and 2023, the average compensation of an executive in the expanded S&P 500 index, which groups the 500 largest American companies, increased by almost 40%, according to research by Equilar, compared to just 27% for private sector workers in the US. U.S.
For executives, this value is 16.3 million dollars (R$87.4 million) annually.
This increase did not generate many shocks among shareholders, who this year rejected employer remuneration plans in only two cases when the matter was raised at meetings, according to the company ISS-Corporate.
In 2021 and 2022, a series of setbacks affected several big Wall Street corporate names, from Starbucks and JPMorgan Chase to technology companies Intel and General Electric.
“Investors are finally rebelling against bosses’ massive pay raises,” highlighted Time magazine in June 2022, before this apparent reticence disappeared almost as quickly as it appeared.
“Shareholders tend to vote against plans after poor company performance or a drop in share price,” explained Kevin Murphy, a professor at USC University and an expert on executive compensation.
– More transparency –
It is noteworthy that, at the time of the shareholder rebellion, the coronavirus pandemic had seriously shaken the economy and financial markets.
“Some (stock) prices had recovered, but not all,” he recalled. On the other hand, the current market context, in which Wall Street has broken dozens of records since the beginning of the year, does not encourage protests.
Shareholders of electric car manufacturer Tesla even validated on Thursday tycoon Elon Musk’s huge compensation plan, valued at just under $50 billion (R$268.1 billion).
The so-called Dodd-Frank law, born out of the 2008 financial crisis and which spread across the world, has required since 2011 that companies listed on the stock exchange submit their executives’ remuneration to a shareholder vote at least once every three years, a provision known as “Say on Pay” (opinion on remuneration).
The vote is merely advisory, but in the event of a negative vote from shareholders, the majority of corporate boards resign and modify the salary package.
“Say on Pay” introduced transparency in the business world, which “abandoned bad practices. From this point of view, I believe things are much better”, said Rosanna Landis Weaver, from the shareholder protection association As You Sow.
– No objections –
The Dodd-Frank Act also requires corporations to publish the relationship between the chief executive officer’s compensation and the average salary at the company.
In 2023, a corporate director received, on average, 196 times the average salary of his company’s employees, well above the 158 times five years ago, according to Equilar.
According to a survey released this week by Bentley University in conjunction with the Gallup Institute, 82% of Americans consider it “somewhat” or “extremely” important to “avoid a very significant pay gap between bosses and average employees.”
“It’s a delicate topic”, highlighted in the research Kristina Minnick, professor of finance at Bentley, who explained that “high salaries can attract better professionals, but they can also be considered excessive”.
However, advocates of limiting executive pay do not find support within the broader electorate.
The bills presented in recent months by congressmen Alexandria Ocasio-Cortez and Bernie Sanders, two figures from the left wing of the Democratic Party, remain blocked in the American House of Representatives.
“Say on Pay” led many companies to turn to specialized consultancies and use reference scales to compare their salary plans with those of the rest of the market.
Therefore, “there are very few recent examples of a CEO receiving an exorbitant sum upon leaving office,” argued David Yermack, a finance professor at New York University.
#Shareholders #amen #executive #pay #raise