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Article | Executive Pay Memo North America

CEO pay raises drop significantly in 2022

By Michael Bowie , Sarah Huber and Ruben Sandoval | May 31, 2023

Lower annual bonus payouts and stock prices drive reductions in pay for many CEOs.
Executive Compensation

Lagging annual operating performance and stock market declines resulted in significant drops in pay for several U.S. CEOs in the most recent year. The proportion of CEOs who received a reduction in total pay in the most recent year doubled compared with the prior year, from 21% in 2021 to 42% in 2022.

Overall, total pay, as reported in the summary compensation table of company proxy statements, for S&P 1500 company CEOs increased just 2.7% at the median in 2022, compared with a median increase in total pay of 18.3% for the year prior (Figure 1). Target pay, which is the pay companies set at the start of the year and is intended to be paid over time, increased 7.7% in 2022, a moderate drop from the 9.4% increase the year prior. CEOs realized the most significant drop — from a 37.1% increase in 2021 to a 6.2% increase in 2022 — in earned pay, which is the pay received over the course of the year from fixed pay, incentive payouts, and vested and exercised equity awards. These pay definitions do not include pay reported in the new pay-versus-performance tables required this year, which will be the subject of a separate upcoming WTW Executive Pay Memo.

Total pay definition What’s included? 2020 - 2021 2021 - 2022
Summary compensation table (SCT) total pay Reported salary + annual and long-term cash bonuses earned + the grant-date value of long-term equity incentives + the value of perquisites + earnings from deferred compensation and the change in value of executive pensions 18.3% 2.7%
Total target pay Target salary + target annual bonus + grant-date fair value of stock options, restricted stock, and performance awards 9.4% 7.7%
Total earned pay Reported salary + annual bonus and long-term incentives earned + value of vested restricted stock/units and exercised options/SARs 37.1% 6.2%
Figure 1. Year-over-year median changes to S&P 1500 CEO total pay

Source: WTW’s Global Executive Compensation Analysis Team research; reflects a constant sample of 450 S&P 1500 CEOs.

Looking at the various components of total pay — salaries, annual bonuses and long-term incentives (LTI) — we find that each component of pay affected directional pay increases observed in the most recent year differently than in the year prior.

Salaries: Following a year of remaining flat, salary growth returned to the typical increases of roughly 3% seen before the pandemic. More CEOs received salary increases, and the increases received overall were higher than the year prior. Nearly three-quarters of CEOs (73%) received an increase in salary in 2022 compared with 65% who received an increase the previous year. The median adjustment for those receiving increases was 4.5% in 2022, compared with 4.1% in the year prior.

Annual bonuses: Target bonus levels for S&P 1500 CEOs increased 4.2% in 2022, up from the flat change the previous year and slightly higher than the roughly 3% growth seen in the several years prior. Earned annual bonuses for S&P 1500 CEOs from 2022 decreased 2.5% after a significant 36.8% increase at the median observed in the 2020 – 2021 cycle.

123% of target Average bonus payout in 2022, down from 148% in 2021

Average annual bonus payout was 123% of target in 2022, compared with 148% of target in 2021. Most notably, while 35% of annual bonus payouts in 2021 were above 170% of target, we saw this drop significantly in 2022, with only one-fifth of companies (20%) paying bonuses over 170% of target in 2022. As shown in Figure 2, the trend in annual bonus payouts shifted to a normal distribution around target versus skewed to above target in 2021. All buckets less than 110% to 130% increased in percentage prevalence, while the buckets above that decreased in prevalence from 2021 to 2022.

Source: WTW’s Global Executive Compensation Analysis Team research; reflects a constant sample of 450 S&P 1500 CEOs.

LTI: Target LTI levels grew at a rate of 8.4% from 2021 to 2022, which is generally consistent with the 10.7% growth seen from 2020 to 2021. Earned LTI for S&P 1500 CEOs grew 10% in 2022, down significantly from the 44.4% increase observed in 2021 and largely a result of market performance during the 2019 – 2021 cycle, outpacing that of the 2020 – 2022 cycle.

Earned LTI, which is the realized value of options exercised and shares vested, dropped significantly in the most recent year versus the year prior due to a decline in the number of options exercised and only a slight uptick in the number of shares vested, with a significant drop in the dollar value associated with these transactions. A contributing factor to slower growth in earned value was that only 30% of S&P 1500 CEOs exercised stock options in 2022, down from 34% in 2021. The average number of options exercised fell by 2.8% in 2022.

117% of target Average during 2020 – 2022, up from 115% of target in the 2019 – 2021 cycle

Looking at long-term performance awards, average payouts were slightly up relative to 2021, from 117% of target versus 115% of target on average, suggesting companies performed well relative to their long-term strategies set in 2020. As shown in Figure 3, the number of plans paying out above 170% of target (near or at maximum performance) increased significantly.

Source: WTW’s Global Executive Compensation Analysis Team research; reflects a constant sample of 240 S&P 1500 CEOs for the FY 2019 – 2021 and FY 2020 – 2022 cycles.

While there might appear to be a contradiction in the fact that higher LTI payouts observed should not result in the lower total pay increases in 2022, the impact of the underlying stock values tied to the awards must also be considered. Payouts as a percentage of target is offset by the decrease in company total shareholder return resulting in the relatively lower realized values.

2022 CEO pay in summary: Salary adjustments, which had been put on pause for many during the challenges of the pandemic, returned to historical rates and norms. Payouts from annual bonus were curtailed compared with recent years as operational challenges mounted in hitting more rigorous performance hurdles. And while payouts from LTI awards remained consistent, from a realized value standpoint, CEO LTI values were down relative to 2021, driven by overall reduction in the stock prices of the underlying equity awards. Overall CEO pay in 2022 saw plenty of changes from observations in the past few years, but the underlying levers affecting pay remain intact.


Associate Director, Global Executive Compensation Analysis Team (Arlington)
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Senior Associate, Executive Compensation & Board Advisory (Arlington)
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Director, Executive Compensation and Board Advisory (Seattle)
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