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2015 CEO Pay Strategies | 2
3. Contents
2015 CEO Pay Strategies | 3
Introduction 4
Executive Summary / Methodology 4
Key Findings 4
Total Compensation 5
S&P 1500 Total Compensation 6
S&P 500 Total Compensation 6
S&P 1500 Total Compensation by Sector 6
Pay Components 7
S&P 1500 Median Pay Component Values by Year 8
S&P 500 Median Pay Component Values by Year 8
S&P 1500 Average Pay Mix (Cash vs. Equity) 9
S&P 1500 Average Pay Mix 10
S&P 1500 Prevalence of Cash Bonus Payouts 11
S&P 1500 Prevalence of Cash Bonus Payouts by Sector 12
Performance Equity and Equity Mix 13
S&P 1500 Equity Vehicles by Grant Prevalence 14
S&P 500 Equity Vehicles by Grant Prevalence 14
S&P 1500 Equity Vehicles by Grant Prevalence Sector Breakdown 15
S&P 1500 Equity Mix 16
S&P 500 Equity Mix 16
4. Executive Summary
The landscape of executive compensation continues to be shaped by new SEC
regulations as well as the attentions of both institutional investors and proxy
advisory firms. Despite market performance regularly breaking records in fiscal
2014, CEO compensation was still subject to the aforementioned pressures to
change. This report seeks to elucidate and encapsulate these changes to the
way America’s top executives are compensated.
Methodology
The CEOs included in this analysis include all who served in such a position at the
end of their company’s applicable fiscal year, and for the entire preceding year.
Previous versions of this report have excluded CEOs not in place for at least two
full years and included only those years in the analysis. The new methodology
has the benefit of more accurately reflecting the current makeup of America’s
CEO population and allowing comparison across any number of years. The
period chosen for most graphs and statistics is five years, encapsulating the
developments taking place since the financial crisis reshaped the American
economy and once again brought increased national attention to compensation-
related issues. The conglomerates sector was excluded from graphs displaying
sector information due to the small sample of companies. However, those
companies and their CEOs were included in all index-level statistics.
Although the graphics provided herein display a wide range of statistical
information pertaining to CEO compensation, they are only a small sampling of
available information.
Introduction
KEY FINDINGS
• Compensation of CEOs
has continued to grow.
Median compensation in
the S&P 500 was $10.3
million (up 0.9% year
over year) and median
compensation in the S&P
1500 was $5.3 million.
• Performance equity has
remained an important
part of pay.
83.2% and 82.2% of S&P
500 and S&P 1500 CEOs,
respectively, received
performance equity
awards.
• Options have given up
more ground.
The median S&P 500 CEO
saw only 15.4% of his or
her total compensation
value in the form of
options. Less than half of
S&P 1500 CEOs received
options at all.
2
3
1
2015 CEO Pay Strategies | 4
6. Total Compensation
In a booming market, companies
continued to elevate their
benchmarks as they sought better
performances from both their
executives and their own respective
businesses. As a result, CEO
compensation continued to rise across
all of the S&P 1500’s indices.
With the financial crisis no longer
at the forefront of the economy’s
collective mind, both CEOs and
corporations alike profited. Median
pay in the S&P 1500 rose since 2010,
from $4.0 million to $5.3 million.
2
4
6
8
10
6
9
12
15
2010 2011 2012 2013 2014
.
.
.
13 1 .
.
.
13 0 .
.
.
12 9
.
.
.
14 4 .
.
.
14 5
.
.
.
5 9
.
.
.
6 3 .
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.
6 4
.
.
.
7 2 .
.
.
7 3
.
.
8 6 .8 9
.
.
10 6
.
.
11 0 .
.
10 8
.
.
11 9
.
.
12 2
.10 2
.9 2
.10 3
75th Percentile Average Median 25th Percentile
0 3 6 9 12 15
Healthcare 3.5MM 6.3MM
4.0MM 2.3MM 4.1MM
3.0MM 3.4MM 3.3MM
3.3MM 2.0MM 3.5MM
3.7MM 1.7MM 3.0MM
3.1MM 1.7MM 3.2MM
2.4MM 1.9MM 3.5MM
2.4MM 2.8MM
Basic Materials
Consumer Goods
Utilities
Industrial Goods
Services
Financial
Technology 2.6MM
75th PercentileMedian25th Percentile
3.7MM
S&P 1500 Total Compensation1
S&P 500 Total Compensation2
S&P 1500 Total Compensation by Sector3
MILLIONSMILLIONSSECTOR
MILLIONS
DATA POINTS
• From 2013 to 2014, median CEO
pay rose 7.8%, a slight change
from the 7.4% increase from 2012
to 2013 (Fig. 1)
• Median CEO pay in the S&P 500
grew only 0.9% in 2014 (Fig. 2)
• Median compensation was highest
in the healthcare sector and lowest
in the financial sector (Fig. 3)
2015 CEO Pay Strategies | 6
8. The graphs below illustrate
the degree to which CEO
compensation trends over the last five
years were driven by stock awards.
Median values of all compensation
elements in previous years were
either relatively flat or down slightly
except for stock. Performance-based
stock awards in particular saw a steep
growth prior to 2014. This year, it
appears as though this growth is
beginning to plateau. The graphs
below show the median value for each
pay type, with 2014 values labeled.
In the S&P 500, the same trends
played out at higher values, and
stock played an even larger role in
compensation packages.
Pay Components
DATA POINTS
• From 2010 to 2014, the median
value of performance-based stock
compensation in the S&P 1500
increased 38.1%, from $1,358,422
to $1,875,337, while bonuses
increased 12.4% and the median
salary value increased 2.2% (Fig. 1)
• Options were the only component
that diminished, with the median
value plummeting from its 2010
figure of $346,600 all the way to
$19,857 (Fig. 1)
• In the S&P 500, median
performance-based stock
compensation increased by 31.1%
since 2010 and 4.4% since 2013
(Fig. 2)
• Options did not decrease as
steadily as in the S&P 500, but
they still decreased by 6.0% from
2013 to 2014 (Fig. 2)
0
0.5
1.0
1.5
2.0
2.5
StockSalary Bonus Options Other
.
.
.
.
0 08
.
.
.
.
0 02
.
.
.
.
0 9
.
.
.
.
1 1
.
.
.
.
1 9
2013 20142010 2011 2012
BonusSalary Stock Options Other
0
1.0
2.0
3.0
4.0
5.0
.
.
.
.
0 2
.
.
.
.
1 1
.
.
.
.
1 4
.
.
.
.
2 1
.
.
.
.
4 5
2013 20142010 2011 2012
S&P 1500 Median Pay Component Values by Year1
S&P 500 Median Pay Component Values by Year2
MILLIONSMILLIONS
2015 CEO Pay Strategies | 8
9. Pay Components (continued)
Economic sectors varied in the
degree to which they relied on
various compensation vehicles. The
graph above breaks down CEO
compensation according to its
component sectors and indices and
by the main components of pay, cash,
and equity (as well as “other,” which
includes deferred compensation,
benefits, and perquisites). Larger
companies, as well as technology,
basic materials, and healthcare
companies, all relied particularly
heavily on equity. For the S&P
1500 as a whole, the percentage of
compensation paid in equity stood at
56.1% and cash at 40.6%. However,
average equity rose from small- to mid-
to large-cap companies, with equity at
60.5% of the average pay mix among
S&P 500 companies.
DATA POINTS
• S&P SmallCap 600 companies
had the highest percentage of
pay attributable to cash at 49.5%,
higher than any individual sector
(Fig. 3).
• The basic materials and healthcare
sectors each had relatively high
equity at 58.0% and 60.9% of the
average pay mix, respectively.
The only sector to have a higher
percentage of pay in cash than
equity was the financial sector,
which had a mix of 49.7% cash
and 45.6% equity (Fig. 3)
0 20 40 60 80 100
36% 4%
3%
4%
3%
3%
3%
4%
4%
4%
3%
3%
3%
60%
55%
45%
53%
58%
49%
46%
61%
52%
52%
58%
54%
42%
51%
44%
39%
47%
50%
35%
44%
45%
39%
43%
OtherEquityCash
S&P 500
S&P 400
S&P 600
S&P 1500
Basic Materials
Consumer Goods
Financial
Healthcare
Industrial Goods
Services
Technology
Utilities
S&P 1500 Average Pay Mix (Cash vs. Equity)3
2015 CEO Pay Strategies | 9
10. Pay Components (continued)
DATA POINTS
• Bonuses had the highest average
percentage of total compensation
within the financial and industrial
goods sectors, at 28.1% and
25.6%, respectively (Fig. 4)
• Options were particularly important
within the healthcare sector at
23.9%, compared to 12.9% on
average in the S&P 1500 (Fig. 4)
• The highest salaries as a
percentage of total compensation
were in the S&P SmallCap
600, while salaries made up
a much lower percentage of
total compensation at S&P 500
companies (Fig. 4)
4%
S&P 500
S&P 400
S&P 600
S&P 1500
Basic Materials
Consumer Goods
Financial
Healthcare
Industrial Goods
Services
Technology
Utilities
Basic Materials
Consumer Goods
Financial
Healthcare
Industrial Goods
Services
Technology
Utilities
0 20 40 60 80 100
13% 23% 43% 17% 3%
12% 3%
10% 4%
13% 3%
14% 3%
17% 3%
9% 3%
27% 5%
22% 3%
23% 4%
16% 3%
4% 3%
11% 3%
14% 3%
5% 5%
24% 4%
16% 4%
16% 3%
15% 3%
3% 3%
18% 24% 42%
28% 23% 35%
20% 23% 40%
13% 19% 50%
12% 25% 43%
12% 30% 46%
11% 19% 39%
12% 25% 39%
14% 24% 35%
12% 20% 49%
14% 24% 56%
17% 22% 47%
24% 24% 35%
22% 28% 41%
17% 18% 37%
18% 26% 36%
22% 23% 36%
20% 19% 43%
14% 24% 51%
Options OtherSalary Bonus Stock
S&P 1500 Average Pay Mix4
S&P1500SECTORSS&P500SECTORSINDICES
2015 CEO Pay Strategies | 10
11. Pay Components (continued)
As pay for performance has come under public scrutiny, discretionary
bonuses have been phased out in favor of more short-term, incentive-based
compensation. In 2010, 77.2% of S&P 1500 CEOs received short-term
incentive plan bonuses, compared to 83.5% in 2014.
DATA POINTS
• The prevalence of discretionary
bonus payouts declined
significantly among S&P 1500
companies, decreasing from 23.6%
to 14.5% (Fig. 5)
• Conversely, the prevalence of
short-term cash incentive payouts
continued to increase across
the board, growing from 77.2%
to 83.5% prevalence from 2010
to 2014 in the S&P 1500, and
long-term cash incentive payouts
remained relatively stable (Fig. 5)
20102010 2011 2012 2013 2014
10%
20%
80%
100%
.
.
77%
.
.
77%
.
.
78%
.
9%
.
8%
.
9%
.
7%
.
.
82% .
.
84%
24%
.
.
.
19%
.
.
.
19%
.
.
.
15%
.
.
.
14%
.
.
.
8%
STI LTIDiscretionary
S&P 1500 Prevalence of Cash Bonus Payouts5
2015 CEO Pay Strategies | 11
12. While overall trends of increasing
STI payouts, stable LTI payouts, and
decreasing discretionary bonuses were
consistent across the last five years,
the breakdowns varied significantly by
sector.
DATA POINTS
• Discretionary bonuses were most
common in the financial sector,
present at 22.8% of companies,
compared to 14.5% in the overall
S&P 1500 (Fig. 6)
• The utilities sector had the
highest prevalence of STI
payouts, at 100.0% of companies,
compared to 83.5% in the overall
S&P 1500 (Fig. 6)
Pay Components (continued)
0 20 40 60 80 100
S&P 500
S&P 400
S&P 600
S&P 1500
Basic Materials
Consumer Goods
Financial
Healthcare
Industrial Goods
Services
Technology
Utilities
88%
12%
11%
88%
13%
8%
84%
14%
8%
77%
18%
6%
87%
15%
9%
23%
10%
13%
13%
13%
15%
84%
77%
85%
88%
83%
82%
2%
98%
10%
12%
4%
8%
19%
8%
5%
STI DiscretionaryLTI
S&P 1500 Prevalence of Cash Bonus Payouts by Sector6
S&P1500SECTORSINDICES
2015 CEO Pay Strategies | 12
14. DATA POINTS
• Performance awards were a more
popular vehicle for S&P 1500 CEO
awards than either time-based
options or time-based stock (Fig. 1)
• Although on the decline, time-
based options were still more
prevalent than time-based stock in
the S&P 500 (Fig. 2)
The type of equity that large
American companies use to
incentivize their executives changed
over the period studied. The years
since 2010 saw performance-based
equity take center stage, with the
share of S&P 1500 CEOs receiving
it rising from 45.9% to 82.2%.
Performance-based equity was
even more popular within the S&P
500, received by 83.2% of CEOs.
Options, meanwhile, declined from a
prevalence of 55.0% among S&P 1500
companies in 2010 to 47.1% in 2014.
Larger companies were more likely to
grant each type of equity, and they
generally relied on a greater diversity
of equity vehicles.
2010 2011 2012 2013 2014
40
60
80
100
82%
60%
47%
63%
55%
48%56%
54%
49%
55%
55%
51%
55%
54%
46%
Time-Based Options Performance AwardsTime-Based Stock
2010 2011 2012 2013 2014
40
60
80
100
40
0
08
001
40
60
80
100
67%
58%
51%
70%
63%
50%
70%
60%
48%
76%
60%
50%
83%
58%
53%
Time-Based Options Performance AwardsTime-Based Stock
S&P 1500 Equity Vehicles by Grant Prevalence1
S&P 500 Equity Vehicles by Grant Prevalence2
MILLIONSMILLIONS
Performance Equity and Equity Mix
2015 CEO Pay Strategies | 14
15. While performance-based awards were
more prevalent than time-based stock
or options, this was most pronounced
among the largest companies. In both
the S&P MidCap 400 and the S&P
SmallCap 600, the gap between the
prevalence of performance-award
and time-based-stock was slightly
narrower. Performance awards were
also the most common equity vehicle
within each individual sector.
DATA POINTS
• The healthcare sector had the
highest prevalence of performance-
based equity awards at 92.2%, while
the lowest prevalence was in the
utilities sector, with a prevalence of
65.5% (Fig. 3)
• The utilities sector had the lowest
prevalence by far of time-based
options at just 16.4%, compared
to 47.1% in the S&P 1500 as a
whole (Fig. 3)
0 20 40 60 80 100
S&P 500
S&P 400
S&P 600
S&P 1500
Basic Materials
Consumer Goods
Financial
Healthcare
Industrial Goods
Services
Technology
Utilities
53%
83%
58%
59%
80%
44%
60%
82%
47%
66%
83%
40%
72%
88%
82%
75%
92%
86%
81%
86%
50%
61%
63%
54%
65%
16%
58%
52%
53%
28%
75%
58%
54%
43%
65%
Time-Based Options Performance AwardsTime-Based Stock
58%
S&P 1500 Equity Vehicles by Grant Prevalence Sector Breakdown3
Performance Equity and Equity Mix (continued)
S&P1500SECTORSINDICES
2015 CEO Pay Strategies | 15
16. The following two charts show the mix
of equity vehicles (time-based options,
time-based stock, and performance-
based equity) awarded to CEOs
from 2010 to 2014. The two indices
were similar in the sense that overall
the use of any single equity vehicle
declined, while combinations of equity
increased significantly. In the S&P
1500, a combination of restricted stock
and performance stock was the most
common, whereas the most prevalent
grant practices in the S&P 500
consisted of options and performance
shares or options, restricted shares,
and performance shares.
Performance Equity and Equity Mix (continued)
DATA POINTS
• Equity mixes that included
performance-based awards had the
highest prevalence in 2014. All such
mixes were up sharply in prevalence
over the five-year period, except for
the use of performance shares by
themselves (Fig. 4, 5)
• The number of companies that did
not grant any equity dropped to
7.7% (Fig. 4, 5)
• While in the S&P 1500, the most
common equity vehicle mix was
a combination of restricted stock and
performance stock, the most
common mix in the S&P 500 was
a combination of options and
performance stock (Fig. 4, 5)
0
5
10
15
20
25
No Equity O Only RS Only PS Only O & RS O & PS RS & PS O & RS & PS
23%
.
.
.
17%
.
.
.14%
.
.
.11%
.
.
.
14%
.
.
.
9%
.
.
.
5%
.
.
.
8%
.
.
.
2013 20142010 2011 2012
No Equity O Only RS Only PS Only O & RS O & PS RS & PS O & RS & PS
0
5
10
15
20
25
6%
.
.
.
4%
.
.
.
15%
.
.
.
9%
.
.
.
22%
.
.
.
18%
.
.
.
21%
.
.
.
4%
.
.
.
2013 20142010 2011 2012
S&P 1500 Grant Equity Mix4
S&P 500 Equity Grant Mix5
MILLIONSMILLIONS
2015 CEO Pay Strategies | 16
