Surge in CEO Compensation in 2024: An In-Depth Look
The landscape of chief executive compensation for companies on the S&P 500 experienced a significant uptick in 2024, with typical pay packages rising nearly 10%. This surge can be attributed to a combination of a robust stock market and sharply increasing corporate profits, marking another exceptional year for many of America’s largest firms.
Performance-Based Compensation Trends
In response to shareholder demands for greater accountability, many companies are now tying CEO compensation more closely to performance metrics. A substantial portion of these pay packages consists of stock awards. These awards, designed to ensure that CEOs remain focused on long-term company growth, often come with conditions — executives typically cannot cash in their stock until they meet certain performance targets. These targets usually revolve around stock price increases, market valuation, or improved operating profits, creating a link between executive rewards and the company’s success.
The Numbers Behind the Pay Packages
According to a recent survey by the Associated Press, which analyzed data collected by Equilar, the median compensation for CEOs rose to $17.1 million. This figure represents a notable 9.7% increase compared to the previous year. In contrast, the median employee salary among the surveyed companies was $85,419, reflecting a more modest year-on-year increase of 1.7%. The stark contrast highlights the growing disparity between executive and worker compensation.
Economic Context and Market Performance
Despite challenges such as persistent inflation and elevated interest rates, the economy provided multiple tailwinds for executives. Consumer spending remained steady, inflation showed signs of easing, and the Federal Reserve lowered interest rates. Additionally, the job market continued to demonstrate resilience, contributing to overall economic health. On the investment front, the S&P 500 surged by more than 23%, while corporate profits rose over 9%.
Top Earners in 2024
Leading the pack in the compensation survey was Rick Smith, the founder and CEO of Axon Enterprises, whose pay package was valued at a staggering $164.5 million. Axon’s impressive growth, with a revenue increase of over 30% for three consecutive years and a record annual net income of $377 million, underscores the factors driving Smith’s remarkable earnings. A vast majority of his compensation was tied to stock awards contingent on performance targets for the years 2024 to 2030.
Following Smith were other high-profile executives: GE Aerospace’s Lawrence Culp at $87.4 million, Tim Cook of Apple at $74.6 million, Carrier Global’s David Gitlin at $65.6 million, and Ted Sarandos from Netflix at $61.9 million. Across these packages, stock and option awards prominently featured, illustrating the trend towards performance-based remuneration.
The Salary Discrepancy
A critical point of concern highlighted by the survey was the pay ratio between CEOs and median employees. At half of the companies surveyed, it would take an average worker 192 years to earn what a CEO makes in just one year. This ratio serves as a stark reminder of the widening gap in compensation. For example, at Carnival Corp, the CEO earned nearly 1,300 times the median salary, while at McDonald’s, this ratio was approximately 1,000 to 1.
Broader Wage Trends
In a broader context, wages and benefits for private-sector workers in the U.S. climbed 3.6% through 2024, according to the Labor Department. The average wage stands at $65,460 annually, a figure that rises to around $92,000 when factoring in benefits like health insurance.
Gender Representation and Pay Equity
This year saw a record 27 women included in the compensation survey, marking a significant milestone since records began in 2014. The median pay for these female CEOs rose 10.7% to $20 million, compared to a 9.7% increase for their male counterparts, who averaged $16.8 million. The highest-paid female executive was Judith Marks of Otis Worldwide, with a compensation package valued at $42.1 million.
Other leading female executives included Jane Fraser of Citigroup at $31.1 million and Lisa Su of AMD at $31 million. However, concerns persist regarding the stagnation of overall equity trends in executive compensation as companies scale back on diversity initiatives, as highlighted by Christy Glass, a sociology professor studying equity and inclusion.
Summary of Findings
As the landscape of executive compensation continues to evolve, the data reveals an intricate interplay between corporate performance, shareholder demands, and broader economic factors. With rising compensation figures, the disparities in pay, particularly in relation to average workers, prompt ongoing discussions about equity and ethical governance in major corporations.
