The year 2018 was another good one for CEOs and their pay packages, if not for shareholder value creation.
The median pay for the 200 highest-paid CEOs at U.S. public companies with more than $1 billion in revenue rose 16.4% in the fiscal year 2018 to $18.6 million, according to the latest Equilar/New York Times study. The number of executives who received more than $100 million in total compensation climbed to five from two last year.
However, the median total shareholder return for these companies was -5%, down from 20% in 2017 and 14% in 2016.
The highest pay increases were seen by electric car maker Tesla Inc.'s (TSLA) Elon Musk, who enjoyed a whopping 4575310% increase thanks to his 10-year performance award, Steven J. Kean of energy infrastructure company Kinder Morgan Inc. (KMI) and home decor retail chain At Home Group Inc.'s (HOME) Lewis L. Bird, III. Kean and Bird saw their compensations increase 4381% and 2477%, respectively.
Those awarded the most dramatically lower amounts were Ari Bousbib of health care data and services provider IQVIA Holdings (IQV), biotech firm United Therapeutics's (UTHR) Martine Rothblatt and financial services provider Fidelity National Information Services (FIS) chief Gary A. Norcross. They saw their pay packages drop 57%, 55%, and 37%, respectively.
This is the second year firms have been disclosing the ratio of their CEOs' pay to that of a median employee. The median CEO pay ratio for the 200 companies was 277:1 for 2018, up from 275:1 in 2017. The top five firms with the highest ratios were Tesla, retailer Gap Inc. (GPS), toy manufacturer Mattel Inc. (MAT), medical device company Align Technology (ALGN) and restaurant chain Chipotle Mexican Grill (CMG). Gap and Mattel were among the top five in 2017 as well.
Listed below are the highest paid CEOs of 2018 at U.S. public companies with more than $1 billion in revenue. Bloomberg released a similar ranking of the highest paid executives at publicly traded U.S. companies with no revenue lower limit.
1.Elon Musk - CEO Tesla Inc.
Total compensation in 2018: $2.28 billion
CEO pay ratio at Tesla was 1:1 in 2017 and 40668:1 in 2018. Elon Musk has famously refused to accept a salary at the struggling manufacturer. He is paid minimum wage since the firm has to abide by California law, but Musk has said he does not cash the checks, so that money still exists in a Tesla bank account.
But in January of 2018, the controversial chief was given a performance award of Tesla stock options tied to market cap and operational milestones that will vest in 12 tranches over a decade. The last compensation award Musk received was in 2012. "The new performance award has been designed so that Tesla and Elon remain tightly aligned with shareholder interests as they now execute on Master Plan, Part Deux—continuing to build what is the world's first vertically-integrated sustainable energy company, from generation to storage to consumption," said the company in a statement.
Tesla shares rose 6.89% in 2018.
2.David M. Zaslav - CEO Discovery Inc. (DISC.A)
Total compensation in 2018: $129.49 million
David Zaslav saw his pay package soar 207% in 2018 after his employment contract was extended through the end of 2023. The media boss, who joined Discovery Inc. (DISC.A) as president and CEO in 2007, received a $9 million bonus to stay on, in addition to $102 million in Discovery stock options, $14.8 million in stock awards, and his $3 million base salary, reported Variety.
The company acquired Scripps Networks Interactive last year. "Under David's leadership, Discovery has scaled new heights becoming the leader in sports across Europe, building the leading global IP portfolio of high quality content, and positioning Discovery for continued global growth. We are lucky to have him," said Discovery Director and Chairman John Malone in a statement.
Discovery shares rose 10.55% in 2018.
3.Nikesh Arora - CEO Palo Alto Networks Inc. (PANW)
Total compensation in 2018: $125 million
Nikesh Arora was named CEO of cybersecurity firm Palo Alto Networks (PANW) in June 2018 after the company's fiscal third quarter. The former SoftBank Group and Alphabet Inc. (GOOG) executive received a lucrative package that included $40 million of restricted stock, stock options valued at $66 million and a target bonus of $1 million on top of a base salary of $1 million, according to Bloomberg. The company also matched Arora's purchase of PANW shares worth $20 million with restricted shares.
Daniel J. Warmenhoven, lead independent director, said, "As we move forward in this era of digital and security transformation, there is no better person to lead Palo Alto Networks than Nikesh Arora. The Board of Directors is very pleased to have such a proven business and technology leader who brings demonstrated leadership and ability to scale to the company."
Palo Alto Networks shares rose 29.95% in 2018.
4.Mark V. Hurd - Co-CEO Oracle (ORCL)
Total compensation in 2018: $108.29 million
In 2018, Oracle Corp. (ORCL) CEO Mark Hurd received a base salary of $950,000, stock options valued at $103.7 million, perks of $32,470, and a bonus of $3.7 million, according to a filing from the company. The total salaries of the top four highest paid executives at Oracle, which include Chairman and Chief Technology Officer Lawrence J. Ellison, Co-CEO Hurd, Co-CEO Safra A. Catz, and Product Development President Thomas Kurian, was around $400 million.
Hurd was previously Hewlett-Packard's CEO before he resigned after the board of directors found he had misstated expense reports and hidden a personal relationship with a contractor.
Oracle shares fell 2.58% in 2018.
5.Safra A. Catz - Co-CEO Oracle
Total compensation in 2018: $108.28 million
Safra A. Catz, who is also a director of The Walt Disney Company (DIS), received the same compensation package as Mark Hurd in 2018, except her perks were lower at $19,780. Both of their pay packages increased by around 165% from $41 million in 2017. While their base salaries remained the same and they didn't receive any stock awards, their bonuses were five times higher and the stock options they received were six times higher.