Is 2025 The Year of the Golden Parachute or Just Golden Handcuffs?
Is 2025 The Year of the Golden Parachute or Just Golden Handcuffs?
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February 5th, 2025
Written by Frank Glassner, CEO
Veritas Executive Compensation Consultants
As 2025 rolled in, it wasn’t just the ball that dropped—it seems the IRS might have dropped one too, but let's just keep that between me and you. The landscape of executive compensation is changing faster than a hedge fund manager’s heart rate during a market dip. Let's dive into the fast-paced world of CEO pay trends among the S&P 500, and why your next bonus might just afford that vintage Mercedes (or maybe just a Mercedes keychain).
2023: The Year CEOs Got Their Groove Back
Last year, the median S&P 500 CEO, saw a whopping $16.1M hit their bank account, marking a 14% rise somewhat akin to your blood pressure when short-seller start buying up your shares.
Why? Because the Total Shareholder Return (TSR) zoomed up by 26%. That's right, while you were busy recalibrating your investment strategies, those CEOs were recalculating their (for the most part well-earned) new net worth.
2025: The Sounds of Success: Keep the Champagne on Ice
It's no secret that CEO pay sways to the rhythm of TSR performance. In years where the TSR charts plummeted, CEO paychecks stayed almost as flat as that soda you left open during your last board meeting.
Thanks to 2024 and projected 2025 TSR performance increases, you'd expect CEO pay to follow suit. But hold your horses—After last year’s pay extravaganza, this year's bump might feel more like a speed bump. As for 2025, if TSR keeps playing nice, expect those CEO paychecks to keep ticking up.
Long-Term Incentive Plans: Always the CEO's Best Friend
Over in the land of Long-Term Incentive (LTI) awards, the spotlight remains firmly on performance-based shares. While stock options once reigned supreme, they now play second fiddle to the ever-popular restricted stock units (RSUs) and wildly popular performance shares (which can be designed to imitate literally every LTI vehicle – be sure to ask Frank about these LTI wonders). Think of it as the shift from vinyl platters to HD streaming—only much, much more intriguing and versatile.
The Crystal Ball: Executive Pay Forecasts Amid Market Mayhem
Here at Veritas, we've polished our crystal balls and foresee that overall market executive pay might very well climb significantly, thanks to robust TSR performance, a new business-friendly political landscape, and an economic backdrop that's less Lockheed Starliner and more Space-X Dragon.
However, before you start planning that launch party, remember the growing chorus of ne’er do well critics—the media, government watchdogs, and those ever-vocal social activist Karens—all tuning up to take a swipe at executive pay.
So, What’s the Moral of the Story?
Navigating executive compensation isn’t for the inexperienced or faint of heart. It’s a complex ballet danced to a symphony of market performance, strategic foresight, and all too frequently regulatory two-stepping.
Here at Veritas, we’re equipped to help you choreograph an executive compensation strategy and subsequent program designs that hit the high notes like Pavarotti —ensuring your executive pay programs sing in harmony with financial and operating results, employee and shareholder expectations, as well as regulatory frameworks.
Wrapping Up: The Executive Suite Sound of Music
As we dance into 2025, let’s harmonize our strategies, tighten our bow ties, and prepare for another year of conducting the high-stakes symphony that is executive compensation as we know it. Ready to fine-tune your executive pay plans? Veritas is just a note away.
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