Every year, firms dutifully detail what their five highest paid executives receive in compensation. The reported pay is used as a benchmark by other firms, and is oft-quoted by the press to highlight which CEO got the biggest paycheck. But the reported numbers do not always reflect reality, which in the compensation world is referred to as realizable pay.
In a study published Thursday, the compensation advisory firm Equilar looked at the realizable pay over a three year period for a group of S&P 1500 CEOS.
Equilar pulled the reported pay of CEOs whose firms filed their proxies from June, 2012 through December, 2012. Looking at the reported numbers for fiscal years 2010, 2011 and 2012, Equilar then calculated the CEOs realizable pay over that three year period and came up with the 20 highest paid CEOs of this group.
(Read More: BofA's Moynihan Gets 73 Percent Pay Increase in 2012)
In the simplest terms, realizable pay is the sum of an executive's salary, cash bonus, other compensation and the increase or decrease in the value of the equity grants he or she received. Equity grants include stock options, time-vested stock, and performance-based stock. The value of equity grants can vary depending on the performance of the company's stock, and whether the firm achieves certain goals tied to performance based units.
(Read More: RBS Chairman Says CEO's Pay is 'Modest')
Leading the way, John Hammergren, CEO of the health care services and technology companyMcKesson. According to Equilar, his realizable pay totaled $150.6 million over the last three years — 57 percent above his reported pay, or the sum of the pay reported in the firm's summary compensation table for the last three years, of $95.6 million.
Equilar noted a primary driver of realizable pay besting reported pay is a positive total shareholder return (TSR) over the last three years. For example, McKesson's TSR, which includes stock price appreciation and dividends, was 36.8 percent for the three years ending in December, 2012.
A positive TSR though is not always a guarantee that realizable pay will exceed reported pay.
(Read More: Slideshow - 2012 Highest Paid CEOs)
Take Larry Ellison's realizable pay for the last three years. By Equilar's calculation his realizable pay of $109 million dollars is 41 percent of his reported pay of $243.9 million dollars, despite the software giant's total shareholder return being 11.5 percent for the three years. Equilar said the difference between Ellison's reported and realized pay can be attributed to Oracle valuing Ellison's options at far higher levels than they were at the end of 2012.
Realizable pay is likely to be a hot topic this proxy season. With executive compensation still a focus of shareholders, the proxy advisory firm ISS will be looking at the realizable pay of S&P 500 CEOs, who's reported pay raises red flags in ISS's primary analysis. Glass Lewis, another proxy advisor, also plans to use realizable pay when it analyzes CEO pay, feeling it sheds much needed light on what an executive will ultimately earn.
—By CNBC's Mary Thompson; Follow her on Twitter: @MThompsonCNBC