Pulse on Pay: 12 Years of CEO Pay Long-term Trends in S&P 500 Executive Compensation

Actual pay outcomes depend on incentive plan goal rigor, payout leverage, and stock price performance. Companies with lower target pay may still deliver competitive compensation if payouts consistently exceed target and stock price performance is strong. Conversely, higher target opportunities do not guarantee higher realized pay. We previously examined how realized equity outcomes influence actual compensation; this paper extends that analysis by evaluating real-world short-term incentive outcomes over the past decade.

Short-term incentive goal-setting reflects the operating environment at the time performance targets are established; however, exogenous economic factors throughout the year can influence payout outcomes. This article examines pay outcomes across recent economic cycles, illustrating how shifts in goal calibration ultimately shape payout levels and total cash compensation earned.

Key Findings Include:

• Actual bonus payouts to CEOs increased 3% annually, in line with target bonus increases over time.
• Bonus payouts generally tracked with real GDP growth, especially during the COVID period (2020-2021). The payouts reflected both the broader macroeconomic state (e.g., growth, compression) and how goals were calibrated in response
• During typical cycles, average payouts were usually in the 110% to 120% range, reflecting steady economic growth and consistent goal attainment
• During COVID (2020): Payouts shifted closer to 100% of target as companies faced operational uncertainty and economic contraction
• COVID Aftermath (2021): Payouts were heavily concentrated in the above 175% range in 2021, driven by companies down goaling in 2020 and significant economic rebound
• Macroeconomic trends and company-level revenue growth are highly correlated with bonus payouts. It is one of the most commonly used annual incentive metrics and is more comparable across the S&P 500 than other financial and operational measures, which often require greater contextual interpretation