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How much did your CEO make last year?

While many U.S. CEOs have been shamed by labor leaders for being overpaid, in its annual studying reviewing compensation of hospitality company CEOs, Aethos CEO Keith Kefgen suggests in 2018 most CEOs were paid appropriately, with a few outliers. (Scroll down for a list of CEOs and corresponding compensation)

“The AFL-CIO’s most recent analysis puts the average CEO pay at 361 times the typical worker (US$14 million – US$39 million). This will continue to be a sore spot for income equality proponents,” Kefgen said. “But think about CEO pay in relation to athlete pay. Floyd Mayweather made over US$275 million last year for exhibition fights, while Lionel Messi earned US$101 million for playing soccer and his sneaker endorsements. Super Bowl winning Quarterback Tom Brady earned US$34 million in salary, bonus and endorsements last year, too.

“Yes, CEOs make a lot of money. Yes, some of them don’t deserve it. But the answer is in better compensation administration, not government regulation. Will the CEO pay gap create economic instability or unsustainability? I think not,” Kefgen added.

Bob Iger, chairman and CEO of the Walt Disney Company, who topped the list for 2018 | Getty Images
Bob Iger, chairman and CEO of the Walt Disney Company, who topped the list for 2018 | Getty Images

According to Aethos’ 2018 Lodging CEO Compensation survey, the market capitalization varied from Walt Disney’s US$167 billion to InnSuites’ US$22 million. Comparing CEOs from two vastly different companies might appear difficult, but that is what the Aethos model intends to do. In fact, it illustrated that Bob Iger at Disney generally merited his US$36 million paycheck, while James Wirth at InnSuites (barely) deserved his US$134,000 paycheck. “Ultimately, investors seek stock performance not payroll containment.”

As in previous years, the highest paid CEOs in the industry ran the largest companies, according to Aethos. The top 10 CEOs each earned more than US$10 million with Bob Iger topping the list at US$36 million. Glenn Fogel at Booking Holdings earned nearly US$28 million and Chris Nassetta of Hilton earned just under US$19 million. Although their pay packages were significant, these CEOs had Aethos Value Index’s (AVI) over 95. A score of 100 would be a perfect pay-for-performance match. This year’s top performing CEO based on the model was Jorge Gonzalez at St. Joe Company with an AVI of 210. This marks a big swing for Gonzalez, who has been stewarding St. Joe through some very difficult times.

Eight CEOs in the hospitality industry received a base salary of US$1 million or more: Bob Iger topped the list with a salary of US$2.5 million, followed by Frank Del Rio at US$1.5 million. Many of these same CEOs received significant bonuses, with Iger taking home a US$20 million bonus, followed by Fogel at US$6 million. The largest disparities between salary and bonus belonged to Adam Portnoy at RMR – US$300,000 salary to US$2.6 million in bonus, and Fogel at a salary of US$750,000 to his US$6 million bonus. “Interesting to see so much of their pay is at risk,” Kefgen noted.

Like the CEOs in the Fortune 500, long-term incentive plans (LTIP) were a significant portion of overall CEO pay in the hotel industry. Most LTIPs were in the form of restricted stock grants and to a lesser extent, stock options. The largest stock grant went to Fogel, with a value at just over US$21 million. Thirty CEOs on the list had multi-million-dollar grants, which comprised much of their pay.

“We are also seeing more of the LTIP awards having performance vesting attached to them,” Kefgen said. “A strong sign that compensation committees are doing a better job of tying pay and performance.”

Kefgen shared suggestions for the industry. “Although I believe that most income equality advocates miss the boat, fair pay is a real issue,” he said. “For starters, minimum wage needs to increase. Our industry is a beacon for first-time job-seekers and we should do are part to keep them. Secondly, more employees should be included in bonus programs. If the CEO can earn millions in bonus pay, managers should be able to participate. And finally, many argue about the effectiveness of equity pay at lower levels of the organization chart, but that is truly the fastest way to get employees thinking like shareholders.”

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