CEO Pay Soars 13% to Median $16.3M, Far Outpacing Worker Wage Gains Amid Rising Inflation

The typical compensation package for chief executives at S&P 500 companies increased by nearly 13% last year, significantly outpacing wage growth for the average worker amid rising inflation that strained many American households.

The median CEO pay package rose to $16.3 million, a 12.6% increase, as analyzed by Equilar for The Associated Press. In contrast, private-sector workers saw their wages and benefits grow by 4.1% in 2023. At half the companies surveyed, it would take the median employee nearly 200 years to match their CEO’s annual earnings.

CEOs benefited as the economy demonstrated resilience, leading to robust profits and soaring stock prices. After overcoming the pandemic, companies contended with ongoing inflation and higher interest rates. Notably, around two dozen CEOs saw their pay increase by 50% or more.

“In this post-pandemic market, the desire is for boards to reward and retain CEOs when they feel like they have a good leader in place,” said Kelly Malafis, founding partner of Compensation Advisory Partners in New York. “That all combined kind of leads to increased compensation.”

However, Sarah Anderson, who heads the Global Economy Project at the progressive Institute for Policy Studies, argues that the widening gap between executive and worker pay contributes to widespread economic discontent. “Most of the focus here is on inflation, which people are really feeling, but they’re feeling the pain of inflation more because they’re not seeing their wages go up enough,” she explained.

Many companies have responded to shareholder demands to align CEO compensation with performance. Consequently, a substantial portion of CEO pay now consists of stock awards, which often cannot be cashed in for several years and are contingent on meeting specific targets, such as a higher stock price or improved operating profits. The median stock award increased by nearly 11% last year, while bonuses grew by just 2.7%.

The AP’s CEO compensation study covered 341 executives at S&P 500 companies who had served at least two full fiscal years at their companies, which filed proxy statements between January 1 and April 30.

Top Earners

Hock Tan, CEO of Broadcom Inc., led the AP survey with a pay package valued at about $162 million. Broadcom awarded Tan stock valued at $160.5 million on October 31, 2022, for the 2023 fiscal year. He stands to earn up to 1 million shares starting in fiscal 2025 if Broadcom’s stock meets certain targets and if he remains CEO for five years.

At the time of the award, Broadcom’s stock traded at $470. Tan would receive portions of the stock if it reached $825 and $950, and the full award if the average closing price exceeds $1,125 for 20 consecutive days between October 2025 and October 2027. The targets appeared ambitious, but Broadcom’s stock has surged, reaching an all-time high of $1,436.17 on May 28.

Broadcom is capitalizing on the AI boom among tech companies, with its chips used by major banks, retailers, telecom operators, and government bodies. The company highlighted that under Tan, its market value soared from $3.8 billion in 2009 to $645 billion as of May 23, and its total shareholder return significantly outpaced the S&P 500. Tan will not receive additional stock awards during the next five years.

Other top earners in the AP survey include William Lansing of Fair Isaac Corp. ($66.3 million), Tim Cook of Apple Inc. ($63.2 million), Hamid Moghadam of Prologis Inc. ($50.9 million), and Ted Sarandos, co-CEO of Netflix ($49.8 million). Cook’s compensation represented a 36% decline from the previous year after he requested a pay cut for 2023 due to shareholder discontent.

The survey’s methodology excluded CEOs such as Nikesh Arora of Palo Alto Networks ($151.4 million) and Christopher Winfrey of Charter Communications ($89 million). Although Elon Musk received no compensation as CEO of Tesla Inc., he is asking shareholders to restore a pay package estimated at $45 billion, which was previously struck down by a Delaware judge due to a flawed approval process.

CEO Pay vs. Workers

Wages and benefits for private-sector employees rose by 4.1% in 2023 after a 5.1% increase in 2022, according to the Labor Department. Despite these gains, the gap between CEO and worker pay continues to widen. Half the CEOs in this year’s survey earned at least 196 times more than their median employee, up from 185 times in the previous year.

The disparity is particularly stark in low-wage industries like retail. At Ross Stores, the median employee was a part-time retail associate earning $8,618, making it would take 2,100 years to match CEO Barbara Rentler’s 2023 compensation of $18.1 million. A year earlier, it would have taken 1,137 years.

Corporate boards often feel compelled to increase CEO pay to retain top talent, focusing on competitive compensation rather than the pay ratio. “The better an executive performs, the more the board is willing to pay,” Malafis noted.

Historically, the pay ratio was much narrower. After World War II until the 1980s, CEOs of large public companies earned about 40 to 50 times the average worker’s pay, said Brandon Rees, deputy director of corporations and capital markets for the AFL-CIO. “The (current) pay ratio signals a sort of a winner-take-all culture, that companies are treating their CEOs as, you know, as superstars as opposed to team players,” Rees remarked.

Say on Pay

Despite criticism, shareholders typically support executive pay packages. From 2019 to 2023, companies received nearly 90% approval for their compensation plans, according to Equilar data. Occasionally, shareholders reject a plan, though these votes are non-binding. In 2023, 13 S&P 500 companies received less than 50% support for their executive pay packages.

Netflix, for example, revised its pay policies after shareholder discontent. The company eliminated executives’ option to choose between cash and stock options, moving to restricted stock that only pays out after meeting performance targets or time requirements. These changes will take effect in 2024. Last year, co-CEO Ted Sarandos received options valued at $28.3 million and a cash bonus of $16.5 million, while co-CEO Greg Peters received options worth $22.7 million and a cash bonus of $13.9 million.

Anderson emphasized the importance of Say on Pay votes, stating they “shine a spotlight on some of the most egregious cases of executive excess, and it can lead to negotiations over pay and other issues that shareholders might want to raise with corporate leadership.” However, she added, “The impact on the overall size of CEO packages has not had much effect in some cases.”

Female CEOs

While more women featured in the AP survey than in previous years, their numbers remain small compared to male CEOs. Of the 341 CEOs in Equilar’s data, 25 were women.

Lisa Su, CEO and chair of the board at Advanced Micro Devices, was the highest-paid female CEO for the fifth consecutive year, with a compensation package valued at $30.3 million, unchanged from 2022. Her rank rose to 21 from 25. Other top-paid female CEOs include Mary Barra of General Motors ($27.8 million), Jane Fraser of Citigroup ($25.5 million), Kathy Warden of Northrop Grumman Corp. ($23.5 million), and Carol Tome of UPS Inc. ($23.4 million).

The median pay for female CEOs rose 21% to $17.6 million, outpacing their male counterparts, whose median pay increased by 12.2% to $16.3 million.