Every spring, public companies must disclose how much their CEOs have made in the past year in a proxy statement to the U.S. Securities and Exchange Commission (SEC).
This year’s filing has attracted a lot of attention, in particular, because for the first time companies are required to disclose not only the salary figures of top executives but also how much an average employee makes—meant to offer a transparent look at the pay gap within their organizations.
But it doesn’t matter if the numbers are wrong in the first place, does it?
Surprisingly, this happens more often than these large companies would like to admit. This year alone, at least 16 companies in the S&P 500 league reported wrong salary figures of top executives on the first attempt and had to correct them with new documents, according to The Wall Street Journal’s analysis of regulatory filings.
How did they get the numbers wrong? It’s true that calculating a CEO’s total pay can be a complicated job due to the many components in a typical compensation package. In many cases, however, the mistake is simpler than you’d think.
Mistakenly Used Someone Else’s Numbers
LabCorp (Laboratory Corporation of America Holdings), a diagnostic lab chain headquartered in Burlington, N.C., reported to the SEC in March that CEO David King made $11.6 million in 2017 and $1.5 million in 2016.
That would have been a quite impressive raise. But, soon after the filing, employees at LabCorp noticed that they had mistakenly typed other executives’ salary figures on King’s salary sheet in 2016. In a separate document, the company corrected King’s 2016 salary to $10.9 million.
Misplaced the Decimal Point
United Rentals, a construction equipment leasing firm, initially reported that CEO Michael Kneeland made a total of $1.16 million in 2016. Turns out he actually made 10 times more, or $11.6 million.
The company said all of Kneeland’s individual compensation items were recorded correctly, but the company accountant missed a digit in the final column on the proxy statement.
‘Not Our Fault’
When it comes to more complicated calculations, though, many companies have someone else to blame when numbers don’t add up.
Advanced Micro Devices (AMD), a major manufacturer of computer chips, got its CEO salary figure right this year, but made a quite a stir last year. Last spring, AMD reported that CEO Lisa Su had earned $3.6 million in stock rewards in 2015, but later changed the number to $4.4 million.
The company said the discrepancy was due to an error made by its outside consultants, who had miscalculated the accounting value of the performance-based stock awards.
Retroactive Pay Cuts or Raises
In most cases, the bulk of a public company CEO’s salary is paid in the form of stock awards, which are usually tied to a complex, multi-year payout agreement signed at the beginning of a CEO’s employment. As such, calculating the award amount for a particular year sometimes creates headaches for accountants.
For example, last year, packaging company WestRock reported paying CEO Steven Voorhees $5.6 million in stock awards for fiscal year 2015. It took the company two years to realize the calculation was wrong. In this year’s proxy filing, WestRock adjusted Voorhees’ 2015 stock awards to $2.8 million, saying the previously reported amount exceeded the amount allowed under the company program.
Even Warren Buffett’s salary has been misreported.
Per company filings, the 87-year-old CEO of Berkshire Hathaway made $487,881 in 2016 and $470,244 in 2015. But, this year, Berkshire Hathaway corrected his salary to $100,000 for both years, because the company had recategorized the amount in excess from benefit to business expense, which covers Buffet’s personal and home security services.
In 2017, these services cost the company $375,000.
“Berkshire’s Board of Directors believe that, in light of Mr. Buffett’s critical role as Berkshire’s CEO and given that Mr. Buffett spends a significant amount of his time while at home on Berkshire business matters, such costs represent bona fide business expenses,” the Omaha, Neb.-based investment firm said in its proxy statement in March.