The compensation for chief executives in S&P 500 companies soared by nearly 13% last year, significantly outpacing the wage increases for regular employees. The median pay package for CEOs reached an impressive $16.3 million, a 12.6% rise compared to the previous year. Meanwhile, private-sector workers saw a more modest 4.1% increase in wages and benefits during the same period.
Hock Tan, the CEO of Broadcom, led the pack with a staggering pay package valued at approximately $162 million. This significant disparity in compensation highlights the growing income gap between top executives and rank-and-file employees, a trend that has been exacerbated by the economic pressures of the post-pandemic period.
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 Tan’s substantial compensation was largely driven by stock awards valued at $160.5 million, granted on October 31, 2022, for the 2023 fiscal year. These awards are contingent upon Broadcom’s stock performance and Tan’s continued tenure as CEO through fiscal 2025. As Broadcom’s stock has surged to new heights, reaching an all-time high of $1,436.17, Tan’s potential earnings have become even more substantial.
The increase in CEO compensation is not limited to Broadcom. William Lansing of Fair Isaac Corp, Tim Cook of Apple Inc., Hamid Moghadam of Prologis Inc., and Ted Sarandos of Netflix are among the top earners in the AP survey, each receiving multimillion-dollar pay packages. Lisa Su, CEO of Advanced Micro Devices, was the highest-paid female executive for the fifth consecutive year, with compensation valued at $30.3 million.
Despite the substantial gains in CEO pay, the income disparity between executives and regular employees continues to widen. In this year’s survey, the median CEO earned 196 times more than their median employee, up from 185 times in the previous year. This growing gap has sparked criticism and calls for more equitable pay structures.
Critics argue that the current compensation practices reflect a “winner-takes-all” mentality, where CEOs are rewarded as superstars rather than team players. Shareholders, however, have largely supported these compensation packages, with nearly 90% approval rates for executive pay plans over the past five years. Nonetheless, there have been instances where shareholders rejected compensation plans, leading to negotiations and policy changes within companies like Netflix.
Netflix, for example, responded to shareholder concerns by revising its pay policies, eliminating the option for executives to allocate their compensation between cash and stock options. Instead, the company now offers restricted stock that executives can profit from only after meeting specific performance measures.
The (current) pay ratio signals a sort of a winner-takes-all culture, that companies are treating their CEOs as superstars as opposed to team players,”
noted Brandon Rees, deputy director of corporations and capital markets for the AFL-CIO Despite these adjustments, the overall impact of shareholder votes on the size of CEO compensation packages remains limited. Critics like Sarah Anderson of the Institute for Policy Studies argue that while “Say on Pay” votes highlight egregious cases of executive excess, they have not significantly curbed the overall growth in CEO pay.
The trend of increasing executive compensation underscores the ongoing debate over income inequality and the role of corporate governance in addressing these disparities. As companies continue to navigate the economic challenges of the post-pandemic era, the issue of fair and equitable pay remains a critical concern for both employees and shareholders.
