CEOs justify their huge paychecks by presumably making money for their bosses: The investors. But some CEOs got raises even as investors lost out big last year.
There are 11 CEOs in the Standard & Poor's 500, including David Williams of Noble, Stephen Wynn of Wynn Resorts and David Zaslav of Discovery Communications who received raises to their multi-million dollar compensation packages last year even while shares of their companies were among the absolute worst performers, according to a USA TODAY analysis of data from S&P Capital IQ.
Don't blame the market for the stock-price declines of these stocks. These 12 stocks fell last year by an average of 33% – a horrific decline especially considering that the S&P 500 gained 11.4%. These stocks were among the 5% worst performing big-company stocks. All told, investors in these companies lost roughly $51 billion in shareholder value last year from stock-price depreciation. But the CEOs collectively were paid an additional $136 million during the year.
Investors realize very few CEOs will work for a dollar a year. Investors seem to know they must pay up for – and give raises to – CEOs when they boost shareholder returns. CEOs can create strategies that drive returns higher for investors. But those big CEO paychecks can be much harder to write when investors lose money.
CEOs pay is on top of investors' minds now – as it's "proxy season." By now, a majority of big companies have released their proxy statements – revealing what they paid CEOs last year. This analysis looks at executives who were CEO during calendar 2014 – and their pay has been disclosed for the same period as of April 15.
Discovery Communication is the example of where not only the size of the CEO's pay – but also the increase – is in the most direct contrast with the performance of the stock. CEO David Zaslav was given a 368% raise during the year bringing his total pay to more than $156 million. That makes him the most highly paid CEO for 2014. Investors on the other hand, had a terrible year. Shares of the media company, which operates Animal Planet and Discovery, plunged 24% last year. That hurts.
It's not fair to completely pin falling share prices on these CEOs or their decisions. Oil companies' stocks got hammered during 2014 as the price of oil collapsed. Many oil companies' CEOs saw their pay fall during the year. But some actually got raises. David Williams, CEO of London-based oil driller Noble got a 19% bump in pay. Even as shares of the oil company lost 55% of their value last year, Williams saw his pay rise to $14 million.
It's important to note one year in isolation does not determine if CEOs are "good" or "bad," or even whether or not they're worth what they're paid. Wynn Resorts investors had a terrible year in 2014 – the stock fell 23% – due to a slowdown in business in Asia. And yes, CEO Wynn still managed to score a 29% raise in 2014 bringing his total pay to $25 million.
But much longer-term, Wynn has still been a winner for investors. Shares of Wynn are up 115% over the past 10 years, beating the 84% gain by the S&P 500. The stock also yields 5.4%. That's a giant dividend all investors, including Wynn, have benefited from.
That's all well and good. But this time of year, investors are thinking about how much they're paying CEOs. Investors want to know what they got in exchange. And in some cases, the answer was: not much.