Chief executives at the nation’s largest corporations received $9.25 million in average total compensation in 2009, according to the AFL-CIO’s analysis of available pay data from 292 companies in the Standard & Poor’s 500 index. Although average total compensation for these CEOs declined 9 percent from the previous year, executive retirement benefits increased 23 percent.

Source: Institute for Policy Studies.

Source: AFL-CIO analysis of pay data from 292 companies provided by salary.com.

For the first time in U.S. history, the federal government was directly responsible for setting CEO pay levels at companies that received “exceptional assistance” from the Troubled Asset Relief Program (TARP). As the U.S. Treasury Department’s special master for executive compensation, Kenneth Feinberg required executives to take most of their salary in stock and prohibited perks.

For other financial institutions that received government bailout funds, the American Recovery and Reinvestment Act of 2009 prohibited cash bonuses, retention awards or incentive compensation and limited restricted stock grants to one-third of total compensation. The act required bailout recipients to submit their executive compensation plans to an advisory vote by their shareholders. It also prohibited stock option compensation and golden parachute payments to bailout recipient executives.

By the end of 2009, the nation’s biggest banks had repaid the Troubled Asset Relief Program in part by issuing new shares to raise capital. These share issuances were made possible by the government’s stabilization of the financial system. By repaying their bailout funds, these banks were once again free to pay their executives whatever they wanted. Predictably, banks awarded a record $145 billion in total compensation in 2009.[1]

Shareholders may receive more relief from excessive CEO pay in the near future. The financial regulatory reform legislation now before Congress includes a provision to give shareholders a “Say-on-Pay” vote at each public company’s annual shareholder meeting. The U.S. Securities and Exchange Commission is also considering new regulations to give shareholders equal access to the proxy to nominate their own directors.

[1] “Banks Set for Record Pay,” The Wall Street Journal, Jan. 14, 2010.