Recovery of local executive payment practices

Los Angeles CEO pay has seen an uptick in the past year, with leaders in the financial, real estate and technology sectors leading the way.
In the Business Journal’s list, which begins on the next page, 84 percent of CEOs received a pay increase from 2020 to 2021. .

Ian Larkin, associate professor of strategy at UCLA’s Anderson School of Management, said executive pay may rise as large companies recover from the initial financial impacts of the COVID-19 pandemic.

Now that a lot of companies are coming out of the pandemic, they’re seeing really good profits, and in a lot of industries, it’s like, ‘OK, the CEO has successfully helped us out of the pandemic, give him or her a big raise,'” Larkin said.

Finance

One of the CEOs who saw the biggest compensation increase was Michael Arrouti, Century City’s global alternative investment manager Ares Management. It is 870 percent more than last year.

Not all of Arrowti’s colleagues, who occupy three positions on the non-executive list, have experience in development. Ares co-founders David Kaplan and Bennett Rosenthal both took a 59 percent cut in their salaries, while Chief Financial Officer Michael McFerran received a 150 percent raise.

Aris posted revenue of $559 million in the first quarter of 2022, missing expectations by more than 7 percent, but the company’s stock has risen nearly 49 percent over the past two years.
Another financial industry group on the list is Sawtelle-based B. Riley Financial Inc.

The financial services firm’s latest earnings report combined the compensation gains for its executives. B. Riley CEOs Thomas Kelleher and Bryant Riley posted compensation increases totaling more than $20 million — about 436 percent — despite the company’s weak earnings.

In its latest report, B. Riley said it has achieved significant success in all areas, from net profit margin and operating income to net income and revenue. Specifically, net income was negative by nearly $10 million, down more than 70% year-over-year.
Larkin notes that increasing executive compensation can have a significant impact on the stock market. Stock-based compensation can cover a large portion of an executive. For example, more than half of Riley’s total compensation came from stock awards.

“CEO pay is very closely tied to the stock market and up until the last couple of months, the stock market has been doing incredibly well,” Larkin said. “Companies are implicitly using current stock prices when they report what their CEOs and other executives are doing. [show] Value of these options for restricted shares.

real estate

Real estate had a strong presence on both lists and was represented by executives from companies such as KB Home, Alexandria Real Equities Inc., Kilroy Realty Group and Rexford Industrial Realty Inc.

The top executive from the industry was Alexandria CEO and founder Joel Marcus. Marcus was No. 9 on the CEO list with $12.7 million in compensation.

In the year According to the 2022 real estate trends report from PricewaterhouseCoopers, the real estate network of companies said that real estate has returned with a vengeance after a pause in work caused by the pandemic in the middle of 2020.
“Investment cash, domestic and foreign, is pouring into American real estate. A number of factors are driving this demand, including low interest rates and attractive returns relative to risk,” the report said.
Most of the real estate executives on the list have experienced salary increases.

Technology companies compete.

Larkin said one reason for the uptick in this sector is that companies are using compensation consultants to help determine pay packages.
“Those consultants are referring to a package with competitors’ packages,” Larkin said. “So if a CEO gets a big raise, his or her colleagues in the industry often get the same quickly. This can lead to executive compensation when companies try to pay the top for their industry. This happens especially in technology, media and banking.”

Leading the way for tech executives on the list is Snap Inc., the parent company of Snapchat. The Santa Monica company had five entries on the list, more than any other company.

Jared Gruss, Snapchat’s former chief strategy officer, was No. 1 on the non-executive list, earning $26.9 million in total compensation. Gruss is the Chief Strategy Officer of Chime, a fintech company based in San Francisco. Gruss and the other four Snapchat executives on the list either took a cut or saw no change in their compensation. Senior Vice President of Engineering Jerry Hunter took the biggest pay cut of Snapchat executives; Fees fell 61 percent to $10.1 million.

Shares of Snap Inc., which once traded at $74 in October 2021, are now trading around $14. Stock is same as last year. Company executives, ahead of Snap’s second-quarter earnings, warned that external economic conditions could cause the company to miss its revenue forecast.

Industries like tech and digital media will see an increase in executive compensation, Larkin said, adding that the pay cut may be more prominent in the tech industry.

health care

The top healthcare entry on the list came from Arrowhead Pharmaceuticals Inc. CEO and President Christopher Anzalone, No. 3 on the CEO list, who saw a 73% increase in compensation.

Anzalone is one of four healthcare executives on the CEO List 10, following Amgen’s Robert Broadway, Molina Healthcare’s Joseph Zubretsky and Puma Biotechnology’s Alan Auerbach.

All CEOs received compensation increases, but Auerbach led the way by the largest margin, posting a 318% increase in compensation.
“There were certain users, particularly healthcare companies, that made good strategic decisions about how to respond to Covid,” Larkin said, noting that Pfizer was a company that saw or created opportunities amid the pandemic.