In 2023, pay packages for S&P 500 top brass skyrocketed nearly 13%, spotlighting the widening chasm between big-shot executives and their workers. Data gathered by Equilar for The Associated Press shows that the median pay for these CEOs rose up to $16.3 million, a 12.6% hike from the previous year. Meanwhile, wages and benefits for private-sector workers increased by just 4.1%.
This widening gap is starkly evident when considering that at half of the surveyed companies, a median worker would need almost 200 years to match the annual earnings of their CEO. The surge in CEO compensation comes amid an economy demonstrating strong resilience, with robust profits and rising stock prices despite challenges like persistent inflation and higher interest rates.
Kelly Malafis, co-founder of Compensation Advisory Partners, commented on the trend, noting that boards are eager to reward and keep CEOs they see as top-notch leaders. Sarah Anderson from the Institute for Policy Studies argued that the swelling pay gap feeds into the economic challenges of Americans, who feel the impact of inflation more sharply due to stagnant wages.
Many companies have heeded shareholder demands to link CEO pay more tightly to performance, resulting in a substantial chunk of compensation being handed out as stock.
These stock awards, which often can’t be cashed in for years, depend on meeting specific performance targets. In 2023, the median stock award for CEOs increased by almost 11%, compared to a 2.7% increase in bonuses.
The AP’s compensation study analyzed data from 341 S&P 500 executives who served at least two full consecutive fiscal years at their companies and filed proxy statements between January 1 and April 30. Leading the high-roller brigade, Hock Tan of Broadcom Inc. topped the charts with a pay package of around $162 million, thanks largely to hefty stock awards.
Broadcom’s stock goodies for Tan hinge on hitting sky-high stock price goals between fiscal 2025 and 2027. This strategy mirrors the current artificial intelligence boom benefiting companies like Broadcom, whose market value has soared under Tan’s leadership.
Other high-earning CEOs include William Lansing of Fair Isaac Corp. at $66.3 million, Tim Cook of Apple Inc. at $63.2 million, Hamid Moghadam of Prologis Inc. at $50.9 million, and Ted Sarandos of Netflix at $49.8 million. Cook’s salary interestingly saw a 36% decrease from the previous year after he asked for a pay cut following a shareholder vote at Apple’s 2022 annual meeting.
The gap between CEO and worker pay keeps stretching despite worker pay seeing a bump post-pandemic. For instance, at Ross Stores, a median part-time retail worker pulling in $8,618 a year would need a staggering 2,100 years to match CEO Barbara Rentler’s 2023 paycheck of $18.1 million.
Corporate boards often feel compelled to offer competitive compensation to retain high-performing CEOs, regardless of the growing pay disparity. This focus on competitive pay within industries rather than equitable pay ratios has led to a winner-takes-all culture, according to Brandon Rees of the AFL-CIO.
Despite criticism, shareholder approval for executive pay packages remains high, typically just under 90%. Yet, shareholders sometimes push back, like in 2023 when investors at 13 S&P 500 companies nixed executive pay plans. In response, some outfits, like Netflix, tweaked their pay policies to soothe shareholder gripes.
Female CEOs, still a rare breed, saw their median pay jump by 21% to $17.6 million, outstripping their male peers. Topping the list was Lisa Su of Advanced Micro Devices, with a pay package worth $30.3 million, trailed by Mary Barra of General Motors and Jane Fraser of Citigroup.
As the pay gap keeps widening, the chatter around executive compensation and its role in broader economic inequality remains a hot-button issue in corporate America.
