Despite regulatory efforts to curb their pay, chief executives are still raking it in.
Two CEOs received upwards of $1 billion in fiscal 2012 — a record for a single year, according to the 11-year-old GMIRatings pay survey. Mark Zuckerberg of Facebook landed in the top slot with $2.28 billion, and Richard Kinder, co-founder of the energy pipeline company Kinder Morgan, followed with $1.12 billion.
It’s not the base salary that did it for either of them. (Kinder’s annual salary is only $1.) It’s the income generated by stock or stock options given to them by their respective companies.
The bulk of Zuckerberg’s annual package — $2,276,677,500 — came from exercising 60 million stock options as part of Facebook’s initial public offering in May 2012. Shares of the company were priced at $38 when the company went public. Zuckerberg’s options allowed him to buy those shares for 6 cents. He sold more than $1 billion worth of shares at the IPO, the GPI report said.
Another $1.2 million of Zuckerberg's compensation came in the form of perks, including personal use of the company jet. Zuckerberg’s base salary for the year ($503,205) and his bonus ($266,101) basically amount to a rounding error.
Greg Ruel, senior research analyst at GMI, said he expects Zuckerberg could be a regular in the survey’s list for the next couple of years, given that the Facebook co-founder has another 60 million options that he can exercise at any time.
Since GMI limits its surveys to public companies, this is the first time it has considered Zuckerberg’s compensation. Kinder, whose company went public (again) in 2011, has landed on the group’s top 20 list before, but only in the 18th slot, Ruel said.
Since then, Kinder has catapulted to No. 2 because more than 31 million shares of his restricted stock in the company vested. GMI said that Kinder “disclaims” about a third of the shares. Translation: Kinder is holding those shares in a limited partnership, and while the shares are in his name, they are not for his benefit, Ruel said.
Even though he’s the company’s single largest owner, Kinder does not receive a bonus, a pension or any other perk, according to the company’s proxy statement. And he reimburses the company for his portion of healthcare premiums and parking expenses.
GMI compiles its listing by scouring proxy statements for the pay packages of North American CEOs who have held their positions for all of the previous two years. In fiscal 2012, 2,259 CEOs met that criteria.
Below is a look at the top 10 list. GMI said it’s the first time in the survey’s history that all of those who landed in the top spots earned at least $100 million.
Top Ten Highest Paid CEOs 2012 (Source: GMI Ratings)
- Mark Zuckerberg, Facebook, Inc. Total actual compensation: $2,278,668,214
- Richard D. Kinder, Kinder Morgan, Inc. Total actual compensation: $1,116,685,089
- Mel Karmazin, SiriusXM Radio Inc. Total actual compensation: $255,355,676
- Gregory B. Maffei, Liberty Media Corporation Total actual compensation: $254,890,638
- Timothy D. Cook, Apple Inc Total actual compensation: $143,828,867
- Edward W. Stack, Dick's Sporting Goods, Inc. Total actual compensation: $142,052,496
- Gregory B. Maffei, Liberty Interactive Corporation Total actual compensation: $136,450,484
- Howard Schultz, Starbucks Corporation Total actual compensation: $117,562,601
- Marc Benioff, salesforce.com, Inc. Total actual compensation: $109,544,875
- Frank J. Coyne, Verisk Analytics, Inc. Total actual compensation: $100,432,117
The eye-popping numbers come despite efforts in Washington to rein in runaway CEO pay. Investor advocates have argued that gigantic compensation packages contributed to the financial crisis by encouraging executives to make reckless business decisions.
Starting in 2011, the Dodd Frank financial reform law mandated non-binding “say on pay” votes as a way to advise management on whether the compensation of top executives is appropriate. More recently, the Securities and Exchange Commission unveiled a proposal that would require companies to disclose how much more their chief executives are paid than their other employees. While some say that effort is merely to encourage transparency, others say it's designed to shame companies into cutting back on executive compensation packages.