U.S. CEOs' 2021 compensation increased the most in seven years
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Last year the CEOs of the largest U.S. corporations saw their compensation rise at the fastest pace since 2014, according to an analysis of proxy disclosures by WTW (formerly Willis Towers Watson). Significantly larger annual incentive payouts and higher values of long-term incentives granted last year drove the increase in total pay.
Total pay for CEOs climbed 15.7% in 2021, up from the 3.2% median increase in 2020, and the largest increase since ~16% in 2014. 
"Last year was a bounce-back year for CEO compensation as well as a good year financially for many companies and shareholders,â said Don Delves, North America practice leader of Executive Compensation at WTW.
The analysis is based on 500 S&P 1500 companies that filed proxies disclosing 2021 pay by the end of April. Total pay includes: base salary; actual annual and long-term cash bonuses; grant-date value of long-term incentives, such as stock options, restricted stock, and long-term performance shares; the value of perquisites; earnings from deferred compensation; and the change in value of executive pensions.
Annual bonuses jumped 39.3% in 2021 in contrast to a decline of 6.1% in 2020. More than eight out of 10 (82%) paid annual bonuses that were at or above target levels vs. 45% in 2020. Annual bonuses last year averaged 145% of target, compared with 97% in 2020. The value of long-term incentives increased 9.1% in 2021 vs. 5.5% in 2020.
CEO salaries increased 2.0% in 2021 vs. 1.1% in 2020.
While boards say the increased pay packages reward CEOs for their performance, some disputes have emerged. In May, JPMorgan Chase (NYSE:JPM) shareholders voted against a $52.6M stock option award that was part of CEO Jamie Dimon's 2021 compensation package, what that board described as a one-time award to keep him at the bank for five more years.
Intel (INTC) shareholders gave a thumbs down to the compensation of some of its top executives including CEO Pat Gelsinger. He earned more than 1,700 times what the average employee at the company made.
The shareholder "say-on-pay" votes generally aren't binding. But the JPM board said it would take the shareholder feedback "seriously." At most corporations, the advisory votes on executive compensation overwhelmingly support the company's pay packages.
In February, J. Morgan Rutman stepped down from Sculptor Capital Management's (SCU) board as a protest over CEO James Levin's compensation. His total compensation was valued at $145.8M in 2021 vs. $37.6M in 2020, according to the company's proxy.
More companies are using more than financial goals to determine a CEO's pay. In a separate analysis of 310 S&P 500 companies, 92 added an ESG measure to their 2021 and 2022 annual incentive plans, including 42 that did not previously have an ESG measure, WTW said.
"We expect this trend to continue as part of companies' broader efforts related to risk management, brand value enhancement, and recruiting and retention," said Kenneth Kuk, WTW's senior director, Work & Rewards.
Last year, Mastercard (MA) said it would include performance on three ESG priorities in determining compensation for its most senior executives.