CEO pay rose 12.1 percent last year, Towers Watson says

CEOs of the country’s largest companies saw their compensation grow 12.1 percent last year, according to an analysis by Towers Watson.

That growth far outpaced the median 1.6 percent increase CEOs saw in 2013. It is the fastest annual increase since 2010.

The Arlington-based professional services firm analyzed annual proxies. Much of the compensation growth came from higher pension values, larger annual incentive payouts and higher values of long-term incentives granted last year.

Total pay includes the CEO’s base salary, cash bonuses, grant-date value of long-term incentives such as stock options, earnings from deferred compensation and the change in value of executive pensions.

Much of the pay increase, according to Towers Watson, comes from the increased value of pensions. Excluding pension growth, compensation would have grown 8.1 percent.

Towers Watson’s analysis found that CEO base salaries increased 2.9 percent in 2014, while annual bonuses increased 3.3 percent. Long-term incentives increased 7.1 percent, up from an increase of 5.9 percent in 2013.

“Last year was another strong year for CEO compensation,” Todd Lippincott, North America leader of Executive compensation at Towers Watson, said in a statement. “At the same time, the results show that companies continue to manage their executive pay programs carefully. Last year was a good year financially for many companies and their shareholders. The fact that CEO pay accelerated in a year when revenue growth, earnings and shareholder returns shined demonstrates that CEOs are being rewarded for performance.”

The survey also found that total pay grew more at small companies. Pay for small-cap CEOs grew 13.7 percent last year, while it grew 11.6 percent for large-cap companies and 10.6 percent for mid-cap companies.