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In Executive Pay, a Rich Game of Thrones

Is any CEO worth $1 million a day?

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That’s roughly $42,000 an hour. Or $700 a minute. Or $12 a second.

Think of it this way: In the time it took to read those words, you could’ve pocketed $100. Finish this article and — well, you do the math.

At Apple, the answer to that question is an emphatic yes, and then some. Not since Steve Jobs has a chief executive at Apple, or any other public American corporation, for that matter, been as richly rewarded in stock as Timothy D. Cook, who succeeded Mr. Jobs as chief executive last August, a few months before Mr. Jobs died.

Mr. Cook was paid a cash salary of roughly $900,000 in 2011. On its own, that would have been a ho-hum paycheck for a top American CEO in recent years.

But then came a wild extra, a one-time award, in the form of Apple stock. It was initially worth a staggering $376.2 million. As of the end of last week, it was valued at roughly $634 million, reflecting Apple’s soaring share price.

Many credit Mr. Cook, along with Mr. Jobs, for Apple’s recent success. And the company is quick to note that Mr. Cook’s pay package extends over 10 years. One-half of his stock is scheduled to vest in 2016, and the other in 2021, provided that Mr. Cook still works for Apple. And, at a time when some investors seethe over far smaller paychecks — a mere eight figures is relatively commonplace for top chief executives these days — Apple’s shareholders are hardly up in arms over the magnitude of Mr. Cook’s reward. To the contrary, a vast majority voted in favor of it.

Of course, most of us can’t begin to wrap our heads around pay figures like these. An American with a bachelor’s degree, after all, typically makes $2.3 million, not in a year, but over a lifetime, according to a recent study from Georgetown University.

Data on CEO compensation in 2011, albeit preliminary, confirm what many of us already know: The top brass generally do much, much better than the rest of us, whether times are good or bad. After the ups and downs of the recent boom-bust years, pay among the 100 best-paid chief executives at big American corporations held fairly steady in 2011, according to Equilar, which reviewed CEO compensation for The New York Times. Here are some numbers worth knowing:

• Among the 100 top-paid CEOs, overall pay last year rose a scant 2 percent from 2010.

• The median chief executive in this group took home $14.4 million — compared with the average annual American salary of $45,230.

• In all, the combined compensation of these 100 CEOs totaled $2.1 billion, the rough equivalent of the estimated annual economic output of Sierra Leone.

The full picture won’t become clear until June or so, when corporate proxy statements will detail the full range of executive compensation. But data available as of March 30 suggests that a new elite is emerging in corporate America: CEO’s who make $10 million-plus a year.

Granted, these are chief executives of publicly traded companies, the kind of businesses anyone can buy into on the stock market. Next to pay in the rarefied realms of private American capitalism — the multitrillion-dollar world of hedge funds, private equity and the like — these CEO’s might seem like pikers. Top hedge fund managers collectively earned $14.4 billion last year.

But the Equilar figures also hint at the myriad ways executive compensation is as tailored as a bespoke suit. It is those custom details — the one-off huge stock grants, in Mr. Cook’s case, the token $1 annual salaries or evaporating bonuses in others — that can turn dull proxy statements into page-turners.

Mr. Cook is an extreme example of this phenomenon. He is, experts agree, an outlier — the only chief executive on the Equilar list to pull down a nine-figure paycheck. His stock award was so valuable, even at its initial price, that his total compensation eclipsed that of the next nine CEO’s combined. Those nine included Lawrence J. Ellison of Oracle, at $77.6 million, a perennial on the best-paid list, and Philippe P. Dauman, of Viacom, at $43.1 million.

Aaron Boyd, the director of research at Equilar, the executive compensation data firm based in Redwood City, Calif., that has reviewed executive compensation trends annually for Sunday Business, said Mr. Cook’s pay was unique.

“The amount he got was historic to such a degree that it skews the numbers,” Mr. Boyd said.

But Apple was not the only special case. Consider J.C. Penney, whose new chief executive, Ronald B. Johnson, came in third on the top 100 list, with total compensation of $53.3 million.

Why? Last year, Mr. Johnson left his position as senior vice president of retail at Apple, along with Apple stock worth $101 million at the time that had not yet vested. So, as part of his pay package, J.C. Penney gave Mr. Johnson a one-time stock award worth $52.6 million. (As of the end of last week, his Apple stock would have been worth about $159 million. His Penney stock was worth $58 million.)

Last year’s other top earners included Stephen I. Chazen ($31.7 million) of Occidental Petroleum; Gregory Q. Brown ($29.3 million) of Motorola Solutions, and Howard D. Schultz ($16.1 million) of Starbucks.

Analysts say the uptick in CEO pay is a sign that corporations are returning to business as usual after the last recession . When the economy soured, executive pay fell sharply at many companies, though not as much as many ordinary Americans might have hoped. With the recovery in 2010, pay then skyrocketed. Now it’s stabilizing, suggesting, perhaps, that corporate boards see more predictable economic times ahead.

“On average, pay levels have moderated,” said Doug Friske, the global head of executive compensation consulting at Towers Watson, a human resource consulting firm in New York. “Now we are seeing normalization.”

Corporate boards also seem to be acknowledging criticism of executive pay from shareholders and the public. Some companies have reduced discretionary bonuses and linked executive pay more closely to performance metrics like revenue and share price. Last year, companies also began to hold shareholder votes on executive pay packages, so-called “say on pay” polls required by Dodd-Frank, the Wall Street reform law.

Corporate America hasn’t entirely embraced reform. Some companies and industry groups have asked the Securities and Exchange Commission to jettison — or at least delay putting in place — a provision in the Dodd-Frank law that would require companies to disclose the ratio of CEO pay to median employee pay, the kind of statistic that could grab headlines in this era of the 1 percent.

The 100 highest earners of 2011 have one thing in common, however. Although they could all rank among the 1 percent — households that bring in $380,000 or more — they actually belong in a more exclusive bracket: People with more than $10 million in pay.

But the CEO wealth is hardly trickling down. During the 2010 recovery, the top 1 percent captured 93 percent of the income gains, while the incomes of the 99 percent essentially remained flat, according to a study by Emmanuel Saez, an economics professor at the University of California, Berkeley.

In 2011, the median weekly earnings for full-time wage and salary workers in the United States rose only about 1 percent, to $756, from $747 in 2010, according to data from the Bureau of Labor Statistics. In constant dollars, wages fell a little more than 2 percent.

The C-suite and the shop floor have never been further apart, said Brandon Rees, the deputy director of the AFL-CIO office of investment.

“American workers are having to make do with less,” Mr. Rees said, “while CEOs have never had it better.”

Equilar analyzed base salaries, cash bonuses, perks, stock awards and options for the 100 most highly compensated executives at public companies that had revenue of more than $5 billion and had filed their proxy statements by March 30. (The study excluded severance pay, changes in pension values and stock awarded in previous years that vested in 2011.)

One standout on the list was Vikram S. Pandit, the chief executive of Citigroup. After the company was bailed out by taxpayers in 2009, Mr. Pandit pledged to work for $1 a year until the bank returned to profitability.

Citigroup has since repaid its bailout money, and the board has restored Mr. Pandit’s pay. It amounted to $14.9 million last year, putting Mr. Pandit in 45th place on Equilar’s list. Citigroup’s longtime shareholders are still waiting for their payday: While the company’s net income rose 3 percent last year, Equilar said; its share price fell 44 percent.

New “say on pay” votes, though nonbinding, have caused some companies to make a greater proportion of pay contingent on chief executives’ achievement of rigorous performance goals. Some companies have even eliminated stock option awards — the grants of stock that executives are able to buy at a fixed price — in favor of full-value stock awards that vest only if executives meet specified goals, said Carol Bowie, head of Americas research at Institutional Shareholder Services, a proxy consulting firm for institutional investors.

“We are definitely seeing a trend toward more performance-based pay,” Ms. Bowie said. “It remains to be seen if performance follows.”

At Hewlett-Packard, for instance, shareholders voted in March 2011 to reject the company’s executive compensation plan. The board eventually responded to criticism over the company’s multimillion-dollar executive severance packages. The departure last year of Léo Apotheker, who had served as CEO for 11 months, for example, cost HP shareholders about $30 million, according to a report from ISS.

When HP’s board subsequently chose Meg Whitman as the new CEO, it took some steps to mollify shareholders by giving her a performance-based compensation package. The board offered her a base salary of $1, no cash bonus, no stock awards and a grant of options to purchase 1.9 million shares of HP stock.

Although that amounted to compensation of about $16.5 million, ranking Ms. Whitman 35th on the Equilar list, she will have to meet certain conditions for all of the stock to vest. If she remains employed at HP, she can exercise her option to buy 100,000 shares each year for the next three years. In addition, 800,000 shares will vest if HP’s share price increases by 20 percent under her stewardship, and another 800,000 will vest if the stock increases by 40 percent.

The rest of the top earners list reads like an A-list of corporate titans, from Robert A. Iger of Walt Disney, ranked seventh, with pay of $31.4 million, to William C. Weldon of Johnson & Johnson, ranked 13th, with $23.4 million. (Mr. Weldon plans to step down as chief later this month; he will stay on as chairman.)

Rupert Murdoch of the News Corp. took 10th place, with compensation of $29.4 million — a 75 percent increase from 2010. In a year when the News Corp. and Mr. Murdoch’s son James were embroiled in a scandal over phone hacking, the elder Mr. Murdoch earned a cash bonus of $12.5 million. That is because the company did well financially, analysts said, even if its reputation plummeted.

“Financially, they exceeded their target,” said Mr. Boyd of Equilar. “But from a publicity standpoint, News Corporation has taken a hit over the last year and a half.”

Also among the top 10, David M. Cote, the chief executive of Honeywell International, received total compensation of $35.3 million, putting him in fifth place. Honeywell tends to dole out a huge bonus every other year. Last year, Mr. Cote’s bonus was $23.3 million.

Clarence P. Cazalot Jr., the chief executive of Marathon Oil, received $29.9 million, an increase of 239 percent from the previous year. That put him in eighth place. Mr. Cazalot received a cash bonus of $21.8 million, the second-highest cash bonus, a majority of which came from accelerated payouts for spinning off a company unit, the Marathon Petroleum Corporation.

Next, Alan R. Mulally, who helped turn around Ford Motor, took ninth place, with compensation of $29.5 million. Although Ford’s share price fell nearly 36 percent last year, its net income increased 208 percent.

Elsewhere, Fabrizio Freda, the chief executive of the Estée Lauder Cos., made a big leap. He ranked 18th on the Equilar list, up from 54th place on a comparable list in 2010. He received compensation of nearly $21 million in 2011, a 51 percent increase. Mr. Freda is the first real outsider — and only the second person outside the Lauder family — to run the beauty products empire. Under his stewardship last year, Lauder’s net income increased 47 percent, while its total shareholder return, the change in share price plus dividends paid, increased 90 percent.

Taken alone, Mr. Freda’s compensation may seem high for a company with revenue of nearly $9 billion, said Robin Ferracone, the executive chairwoman and founder of Farient Advisors, an executive compensation and performance consulting firm. But, given the company’s stellar performance and the fact that Lauder fits more in the luxury goods category than the toiletries category, she said, his compensation seemed appropriate.

“The high-fashion industry tends to pay more than the big industrials,” Ms. Ferracone said. “It’s going to look fine to shareholders.”

But investors, among them employees with 401(k) plans, may want additional information to gain more context about whether executive pay packages are reasonable and appropriate.

The AFL-CIO has urged the SEC to put into effect the provision in Dodd-Frank requiring companies to disclose the ratio of chief executive pay to their employees’ median pay. That would give shareholders insight into compensation practices, said Mr. Rees of the labor federation, along with the ability to compare it to those of other companies.

“It puts CEO pay in perspective,” he said. “It’s material to investors.”

Don’t hold your breath. The requirement isn’t likely to come into effect any time soon, because many companies have complained to the SEC that it would be a burden to comply with it, said Ms. Bowie of ISS.

“There’s been a lot of pushback from companies on that,” she said.

Mary L. Schapiro, the chairwoman of the SEC, said at a Congressional hearing last month that the commission was trying to work through “a lot of technical issues” on how companies might calculate this.

The agency has not yet set a date for companies to comply, John Nester, a spokesman for the SEC, said on Thursday

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