Just because an S&P 500 CEO doesn't haul home a million-dollar pay package, doesn't mean there's more profit left for you, the shareholder. At least looking at CEO pay data coming in now from last year.
More than half the companies in the S&P 500 have reported their CEO's total pay for last fiscal year. And just four of them, Take-Two Interactive's Strauss Zelnick, Berkshire Hathaway's Warren Buffett, Copart's Jayson Adair and Corteva's Charles Magro made less than a million bucks last year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's a fraction of the what S&P 500 CEOs, on average, made last year.
And yet, shares of these companies paying their CEOs relative peanuts underperformed the S&P 500 on average, last year at least. The four companies with "low-paid" CEOs saw their stocks, on average, rise just 14.1% in 2021. That's well below the 26.9% rise of the S&P 500. Furthermore, three of the four stocks lagged the S&P 500 last year.
Only one, Berkshire Hathaway, topped the S&P 500 with a 29.6% rise last year. Its top-notch CEO Buffett made just $373,204 last year.
That's 400% higher than the median household income in the U.S. But it's still nothing for a CEO.
Eye On S&P 500 CEO Pay
It's the time of year S&P 500 companies report how much compensation CEOs received in fiscal 2021. And like usual, the number is impressive.
So far, 254 S&P 500 companies reported their CEO's total compensation. Total compensation for these titans of industry is pushing $17 million on average on a preliminary analysis. That's up from the average $13.8 million CEOs at the same companies were paid in the previous year.
Get this: You can make more than $3 million and still be among the lowest paid CEOs in the S&P 500. And expect the final average compensation number to move as additional S&P 500 companies report their compensation packages in coming weeks.
Still, you're hard-pressed to find many CEOs of S&P 500 companies making less than a million. Now that Jack Dorsey handed over the CEO position of Twitter, you'll find even fewer low paid CEOs. Dorsey famously earned a dollar a year to run Twitter.
But companies that do pay less, so far, didn't pay off for investors.
Low CEO Pay Doesn't Pay Off
Reasonable CEO pay is often looked at as a sign a company has tight cost controls. Others say it's an earmark of an active board. That may be true, but it's not reflected in the performance of the shares at least last year.
Take Zelnick, CEO of the maker of acclaimed video games, Take-Two Interactive. His fiscal 2021 pay package of $138,347, including his salary of $1, makes him the lowest paid CEO in the S&P 500. That's not a great deal higher than the company's median employee total pay of $72,046.
But the relatively low pay didn't translate into a big winner for investors last year. Shares of the company actually dropped nearly 15% last calendar year. Longer term, though, Take-Two's shares are up more than 150% in the past five years, topping the S&P 500's 93% gain in that time.
Another example is Copart, whose CEO Adair is considered one of the top managers in the S&P 500 today. The company paid him $490,647 in fiscal 2021, again considered a modest package. The median employee at the company made $35,638. But despite the low relative pay amounts, shares of the company last year rose just 19% and lagged the market. It's important to note, though, shares are up more than 300% in the past five years, again decimating the S&P 500's 93% rise.
The Warren Buffett Exception
If there's one low-paid CEO, though, that paid off last year it's Warren Buffett.
The Oracle of Omaha and famed investor perennially gets paid much less than most S&P 500 CEOs. Last fiscal year he made just $373,204. "Mr. Buffett's total compensation is far less than almost all public company CEOs," the company's regulatory filing proudly said. The median employee pay was $58,881.
But here's a case where investors scored, too. Shares of Berkshire Hathaway soared nearly 30% last year, easily topping the S&P 500. And of course no investor benefited more than Buffett himself. He's still the No. 1 holder of Berkshire stock (currently priced at 538,949 each) with 238,625 shares, more than a 16% stake in the company.
So for him, salary is meaningless. The value of his stake jumped $24.5 billion last year. Doubt he'll be asking for a raise.
Lowest Paid S&P 500 Company CEOs
Based on current CEOs of present S&P 500 members for fiscal 2021
| Person Name | Company | Symbol | Calendar 2021 stock % ch. | Sector | As reported total executive compensation fiscal 2021 |
|---|---|---|---|---|---|
| Strauss Zelnick | Take-Two Interactive | -14.5% | Communication Services | $138,347* | |
| Warren Buffett | Berkshire Hathaway | 29.6 | Financials | 373,204 | |
| Jayson Adair | Copart | 19.2 | Industrials | 490,647 | |
| Charles Magro | Corteva | 22.1 | Materials | 792,786 | |
| Daniel Florness | Fastenal | 31.2 | Industrials | 2,423,614 | |
| Erik Carlson | DISH Network | 0.3 | Communication Services | 2,895,882 | |
| Daniel Carestio | Steris | 28.4 | Health Care | 2,912,769 | |
| Todd Schneider | Cintas | 25.4 | Industrials | 3,741,735 | |
| Christoper Kastner | Huntington Ingalls Industries | 9.5 | Industrials | 3,822,259 | |
| Ganesh Moorthy | Microchip Technology | 26.1 | Information Technology | 3,891,467 |
