The early 2013 proxy statements have been filed,  providing the first glimpse of total pay levels awarded to executives in fiscal 2012.  In the months ahead, a new round of pay data will inevitably lead to the typical stories in the press identifying which CEOs received the largest pay increases and ranking the highest paid CEOs. However, as our initial review of CEO pay levels of 75 S&P 1500 companies shows, determining how much executives get paid is not as easy to answer as it first appears.

Our preliminary findings indicate that CEOs benefitted from relatively modest increases in target pay last year, driven by gains in long-term incentive awards. As shown in Figure 1, short-term salary and target bonus levels both grew less than 3% at the median, while target long-term incentives increased by over 9%. This reversed findings from the previous year, where pay increases were driven by increases in annual bonuses.

While the market has stabilized in the past few years, market returns for individual companies remain mixed and, as a result, total pay figures vary based on the impact of company performance on incentive outcomes. As a result, how much a CEO “earns” also varies depending on the definition of total pay used, as shown in the bottom of Figure 1. While target pay levels (what companies intend to pay assuming target performance levels are achieved) have increased over the past two years, the amounts CEOs can potentially or actually earn have been flat or decreasing, depending on the definition of pay used.

Towers Watson Media

So what do these results mean in terms of pay decisions and design going forward? Is pay for performance working or are there other factors driving pay outcomes? Which definitions of pay should we be focusing on? And will the results for a broader sample of S&P 1500 companies match these early filers?

Tune into Towers Watson’s 2013 proxy season webcast on April 9 for insights into these questions and more from Towers Watson’s top executive compensation experts. Click here to register for the webcast. 

Robert Newbury is a senior executive compensation consultant in Towers Watson’s Arlington, Virginia office who leads the firm’s Executive Compensation Resources unit, which conducts research on a wide range of executive pay issues. Email or

About the Author

 Robert Newbury

Robert Newbury
Towers Watson Arlington