S&P 500 CEO Pay Up by 112% in 10 Years: What Does This Mean?

According to Stocklytics.com, the median pay for chief executives of S&P 500 companies has spiked by 112% in the past decade, culminating in a record-high of $15.7 million in 2023. This significant increase in CEO compensation mirrors the buoyant conditions of the stock market during this period.

The site’s financial analyst, Edith Reads, comments:

As companies grow larger and more complex, the responsibilities of CEOs have expanded. Leading a multinational corporation with a diverse portfolio of businesses requires a unique skill set and strategic vision, justifying higher compensation for those at the top positions.

Stocklytics financial analyst, Edith Reads

Top Executive Compensations

Optimism over artificial intelligence drove tech stocks incredibly in 2023, contributing significantly to the impressive 24% rise in the S&P 500. The stock awards in most of these tech companies have translated into colossal executive compensation, including nine-figure pay packages. About 40% of the top 10 CEOs receiving the highest pay are the respective leaders of tech companies. That includes Hock Tan, the CEO of Broadcom and now the highest-paid CEO by the end of 2023.

Tan received a bountiful compensation, pocketing over $161.8 million in pay, of which $1.2 million was in cash payments. His current pay reflects the extraordinary success Broadcom has experienced, with the company’s stock price surging in response to the escalating demand for its AI-powered offerings by major corporates, including tech giant Microsoft. 

Nikesh Arora, the CEO of Palo Alto Networks, falls in second on the top-paid CEO list,  receiving a wholesome $151.4 million, with $2.3 million in cash pay. 

Making an entry into the financial sector is Stephen Schwarzman, CEO of Blackstone. Schwarzman received an astounding $119.8 million pay package following an 83% rise in the firm’s share price in 2023, making him the third highest-paid CEO. Blackstone is now the largest private equity firm worldwide, with approximately 12,500 real estate assets overall.

Christopher Winfrey, CEO of Charter Communications, takes the fourth slot with a median pay of $89.1 million, of which an impressive $5.2 million was in cash. 

CEOs Will Lansing of Fair Isaac and Tim Cook of Apple follow, concluding the list of the highest-paid tech CEOs in the top 10 with $66.4 million and $63.2 million in median pay. Tim Cook’s cash pay represents the highest cash award among all other CEOs, receiving about $13.7 million.

Why are S&P Companies Prioritising CEO Compensation Over That of Their Employees?

From 2022, the median salary for S&P 500 executives rose astoundingly by over 8%, widening the gap between the average employee’s pay and that of the executives. The average salary for a worker in an S&P 500 company stands at $81,476, highlighting the vast payment disparities between the higher-ups and the average worker.

A CEO’s compensation is often closely tied to their company’s financial success – when the organization generates higher revenues, the CEO’s pay also increases. Furthermore, stock-based awards make up a significant portion of S&P 500 CEO compensation, accounting for an average of 70% of their total pay, which amounted to a staggering $9.4 million in 2023.

Moreover, the talent pool for top executives is incredibly competitive, and if they don’t pay up, CEOs will go off to other companies that will. Ideally, no employer wants to lose an executive that generates a lot of profit. The pay level also affects the quality of managers the organization can attract. 

What Does Increase in CEOS Pay Mean?

The increase in CEO pay could have greater economic implications. First, high compensation for top executives can drive economic growth by incentivizing innovation and attracting top talent. 

However, It can also exacerbate wealth inequality, reducing consumer spending and economic instability. 

Some policymakers have proposed measures to curb excessive CEO pay in response to growing concerns about income inequality and corporate governance. These include higher taxes on top earners, caps on executive compensation, and increased transparency requirements. 

Still, the effectiveness of these measures remains a topic of debate, with some arguing that they could stifle innovation and competitiveness.