Press Release

Total CEO pay in U.S. companies rose 6% in 2016, Willis Towers Watson study finds

Relatively flat bonuses, uneven corporate performance contributed to overall modest increase

April 13, 2017
| United States

ARLINGTON, VA, April 13, 2017 — Increases in total compensation for chief executive officers (CEOs) at the nation’s largest corporations remained fairly moderate again last year, driven largely by uneven corporate performance, increasing bonuses and a sharp decrease in the value of stock option exercises, according to a new analysis of proxy disclosures by Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.

The analysis found total pay for CEOs increased 6% in 2016, up from the 4% median increase in 2015. Total pay as reported in the Summary Compensation Table in company proxy statements includes base salary; actual annual and long-term cash bonuses; the grant-date value of long-term incentives (LTIs) including 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.

The analysis, based on 365 S&P 1500 companies with consistent CEOs that filed proxies disclosing 2016 pay by the end of March, found that CEO salaries increased 2% in 2016, following a 2% increase in 2015. Annual bonuses increased 5% at the median, mostly flat with the previous year. More companies (59%) paid their CEOs annual incentive awards that were at or above target levels in 2016, compared with 58% in 2015. The exercise value of stock options declined sharply (55%) at the median. Target LTIs, the largest component of total CEO pay in major companies, increased 4% at the median in 2016, down from an increase of 9% in 2015.

“The modest increase in CEO pay should come as no surprise in view of the relatively lackluster financial performance of companies in many sectors of the economy in 2016,” said R.J. Bannister, leader of Willis Towers Watson’s Executive Compensation consulting practice in North America. “A strong second half offset a weak first half, resulting in generally flat to moderate performance improvement over several performance metrics.”

The analysis found that LTI plans continue to evolve toward performance-based plans, with large-cap companies emphasizing performance awards more than small-cap companies. More than half (55%) of the value of LTIs in large-cap companies is delivered via performance awards, while 42% of LTI value in small-cap companies is made up of performance awards.

“With signs that economic conditions may improve this year, along with discussions in Washington surrounding tax reform and possible legislative efforts to repeal or limit the executive pay provisions of Dodd-Frank, companies will need to carefully monitor and manage their executive pay programs to ensure they maintain a strong link between pay and performance,” said Bannister.

Other findings from the Willis Towers Watson proxy analysis include:

  • Long-term performance metrics. Almost one in five companies made unplanned adjustments to annual incentive award payouts at year-end, most often for exceptional, one-time events. This illustrates that compensation committees are exercising discretion and making payout adjustments to consider performance holistically, motivate employees and ensure payouts are fair based on what management can control.
  • Strong say-on-pay shareholder support. Among the 165 Russell 3000 companies that disclosed their shareholder voting results by March 31, shareholder support for say-on-pay resolutions averaged 92%. This is roughly the same level of support as in each of the first five years of mandatory say-on-pay shareholder voting.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at

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