CEO compensation surged approximately 10% in 2024, mirroring the skyrocketing stock prices and earnings.
S&P 500 CEO Compensation Soars Almost 10% in 2024, Boosted by Strong Stock Market and Corporate Profits
CEO pay packages at S&P 500 companies surged nearly 10% in 2024, reaching a median of $17.1 million, according to a survey by The Associated Press. While the average employee's income increased by a modest 1.7%, it remains a stark contrast to CEO compensation.
The robust performance of the stock market and the sharp rise in corporate profits played a key role in the significant increase in CEO pay. Many CEOs received substantial stock awards, which are often tied to long-term performance objectives, fostering an alignment of interests between CEOs and shareholders.
The increase in CEO compensation follows pressure from shareholders for a closer link between CEO pay and performance. Stock-based incentives have become increasingly popular, with over 80% of the median CEO pay package consisting of stock awards, which CEOs typically cannot cash in for years unless specific performance targets—such as a higher stock price or improved operating profits—are met.
The AP's CEO compensation survey, which uses data analyzed by Equilar, includes pay data for 344 executives at S&P 500 companies who have served at least two consecutive fiscal years at their companies, which filed proxy statements between January 1 and April 30.
Despite the enthusiasm from the stock market and corporate profits, CEOs had to grapple with challenges such as inflation, relatively high interest rates, and declining consumer confidence last year. However, the economy also presented some favorable developments: consumer spending remained resilient, inflation eased somewhat, the Fed lowered interest rates, and the job market remained strong.
Rick Smith of Axon Enterprises topped the survey with a pay package valued at $164.5 million. More than 90% of Smith's pay package consists of stock awards, which he can only receive if the company achieves certain targets related to its stock price and operations between 2024 and 2030. Other top earners included:
- Lawrence Culp, CEO of what is now GE Aerospac e ($87.4 million)
- Tim Cook at Apple ($74.6 million)
- David Gitlin at Carrier Global ($65.6 million)
- Ted Sarandos at Netflix ($61.9 million)
The median stock award rose almost 15% last year, compared to a 4% increase in base salaries. The trend toward an increasing reliance on long-term incentives is evident, with CEOs citing the benefits of tying executive pay to performance.
Although CEO pay continues to climb, concerns about excessive pay gaps and broader social equity issues persist. At half of the companies surveyed, it would take the median worker 192 years to earn what the CEO makes in one year. This "pay ratio" has been disclosed by companies since 2018, and it tends to be highest in industries where wages are typically low.
While there has been a slight improvement in the gender pay gap, female CEOs' median pay increased by 10.7% compared to a 9.7% increase for their male counterparts. Judith Marks of Otis Worldwide was the highest-earning female CEO, with a pay package of $42.1 million.
In response to the December shooting of UnitedHealthCare CEO Brian Thompson, a growing number of companies are offering security perquisites as part of executive compensation packages. Analysts suggest that this shift may lead to a rise in median security spending from $69,180 in 2023 to $94,276 last year.
Some well-known billionaire CEOs, such as Warren Buffett and Elon Musk, are low in the survey due to their unique compensation packages. Musk received no compensation in 2024, but his 2018 package is the subject of a court battle. Other notable CEOs, such as Starbucks' Brian Niccol and Nvidia's Jensen Huang, did not meet the criteria for inclusion in the survey.
- Given the strong stock market performance and the rise in corporate profits, investors may perceive the health of the economy as favorable for business, potentially influencing their decisions to invest in companies with high-performing CEOs.
- The surge in CEO pay packages can have a ripple effect on the economy, as businesses that allocate significant portions of their finances to high executive salaries might face challenges in other areas, such as research and development or workforce development.
- Tesla, a pioneer in the electric vehicle industry, continues to make waves in the business world, as CEO Elon Musk's unique compensation package, though not high-ranking in the survey, highlights the potential of innovative pay structures that align CEO interests with long-term business objectives.
