NEW YORK (AP) — The everyday compensation package deal for chief executives who run corporations within the S&P 500 jumped almost 10% in 2024 because the inventory market loved one other banner 12 months and company income rose sharply.
Many corporations have heeded calls from shareholders to tie CEO compensation extra carefully to efficiency. In consequence, a big proportion of pay packages include inventory awards, which the CEO typically can’t money in for years, if in any respect, except the corporate meets sure targets, usually the next inventory worth or market worth or improved working income.
The Related Press’ CEO compensation survey, which makes use of knowledge analyzed for The AP by Equilar, included pay knowledge for 344 executives at S&P 500 corporations who’ve served not less than two full consecutive fiscal years at their corporations, which filed proxy statements between Jan. 1 and April 30.
Listed here are the important thing takeaways from the survey:
12 months on the high
The median pay package deal for CEOs rose to $17.1 million, up 9.7%. In the meantime, the median worker at corporations within the survey earned $85,419, reflecting a 1.7% enhance 12 months over 12 months.
CEOs needed to navigate sticky inflation and comparatively excessive rates of interest final 12 months, in addition to declining shopper confidence. However the economic system additionally offered some tail winds: Shoppers saved spending regardless of their misgivings in regards to the economic system; inflation did subside considerably; the Fed lowered rates of interest; and the job market stayed sturdy.
The inventory market’s essential benchmark, the S&P 500, rose greater than 23% final 12 months. Earnings for corporations within the index rose greater than 9%.
“2024 was expected to be a strong year, so the (nearly) 10% increases are commensurate with the timing of the pay decisions,” stated Dan Laddin, a associate at Compensation Advisory Companions.
Sarah Anderson, who directs the World Economic system Venture on the progressive Institute for Coverage Research, stated there have been some latest “long-overdue” will increase in employee pay, particularly for these on the backside of the wage scale. However she stated too many staff on this planet’s richest nations nonetheless battle to pay their payments.
The highest earners
Rick Smith, the founder and CEO of Axon Enterprises, topped the survey with a pay package deal valued at $164.5 million. Axon, which makes Taser stun weapons and physique cameras, noticed income develop greater than 30% for 3 straight years and posted file annual web revenue of $377 million in 2024. Axon’s shares greater than doubled final 12 months after rising greater than 50% in 2023.
Nearly all of Smith’s pay package deal consists of inventory awards, which he can solely obtain if the corporate meets targets tied to its inventory worth and operations for the interval from 2024 to 2030. Firms are required to assign a worth to the inventory awards when they’re granted.
Different high earners within the survey embody Lawrence Culp, CEO of what’s now GE Aerospac e ($87.4 million), Tim Cook dinner at Apple ($74.6 million), David Gitlin at Provider World ($65.6 million) and Ted Sarandos at Netflix ($61.9 million). The majority of these pay packages consisted of inventory or choices awards.
The median inventory award rose nearly 15% final 12 months in comparison with a 4% enhance in base salaries, in response to Equilar.
“For CEOs, target long-term incentives consistently increase more each year than salaries or bonuses,” said Melissa Burek, also a partner at Compensation Advisory Partners. “Given the significant role that long-term incentives play in executive pay, this trend makes sense.”
Jackie Cook dinner at Morningstar Sustainalytics stated the advantage of tying CEO pay to efficiency is “that share-based pay appears to provide a clear market signal that most shareholders care about.” But she notes that the greater use of share-based pay has led to a “phenomenal rise” in CEO compensation “tracking recent years’ market performance,” which has “widened the pay gap within workplaces.”
Some well-known billionaire CEOs are low within the AP survey. Warren Buffett’s compensation was valued at $405,000, about 5 instances what a employee at Berkshire Hathaway makes. Based on Tesla’s proxy, Elon Musk obtained no compensation for 2024, however in 2018 he was awarded a multiyear package deal that has been valued at $56 billion and is the topic of a courtroom battle.
Different notable CEOs didn’t meet the factors for inclusion the survey. Starbucks’ Brian Niccol obtained a pay package deal valued at $95.8 million, however he solely took over as CEO on Sept. 9. Nvidia’s Jensen Huang noticed his compensation develop to $49.9 million, however the firm filed its proxy after April 30.
The pay hole
At half the businesses in AP’s annual pay survey, it might take the employee on the center of the corporate’s pay scale 192 years to make what the CEO did in a single. Firms have been required to reveal this so-called pay ratio since 2018.
The pay ratio tends to be highest at corporations in industries the place wages are usually low. For example, at cruise line firm Carnival Corp., its CEO earned almost 1,300 instances the median pay of $16,900 for its staff. McDonald’s CEO makes about 1,000 instances what a employee making the corporate’s median pay does. Each corporations have operations that span quite a few nations.
Total, wages and advantages netted by private-sector staff within the U.S. rose 3.6% via 2024, in response to the Labor Division. The typical employee within the U.S. makes $65,460 a 12 months. That determine rises to $92,000 when advantages equivalent to well being care and different insurance coverage are included.
“With CEO pay continuing to climb, we still have an enormous problem with excessive pay gaps,” Anderson stated. “These large disparities are usually not solely unfair to lower-level staff who’re making vital contributions to firm worth – in addition they undercut enterprise effectiveness by reducing worker morale and boosting turnover charges.”
Some good points for feminine CEOs
For the 27 ladies who made the AP survey — the very best quantity courting again to 2014 — median pay rose 10.7% to $20 million. That compares to a 9.7% enhance to $16.8 million for his or her male counterparts.
The best earner amongst feminine CEOs was Judith Marks of Otis Worldwide, with a pay package deal valued at $42.1 million. The corporate, identified for its elevators and escalators, has had working revenue above $2 billion for 4 straight years. About $35 million of Marks’ compensations was within the type of inventory awards.
Different high earners amongst feminine CEOs had been Jane Fraser of Citigroup ($31.1 million), Lisa Su of Superior Micro Gadgets ($31 million), Mary Barra at Common Motors ($29.5 million) and Laura Alber at Williams-Sonoma ($27.7 million).
Christy Glass, a professor of sociology at Utah State College who research fairness, inclusion and management, stated whereas there could also be a number of extra ladies on the highest paid CEO checklist, general fairness tendencies are stagnating, notably as corporations reduce on DEI applications.
“There are maybe a couple more names on the list, but we’re really not moving the needle significantly,” she stated.
Prioritizing safety
Equilar discovered {that a} bigger variety of corporations are providing safety perquisites as a part of government compensation packages, presumably in response to the December taking pictures of UnitedHealthCare CEO Brian Thompson.
Equilar stated an evaluation of 208 corporations within the S&P 500 that filed proxy statements by April 2 confirmed that the median spending on safety rose to $94,276 final 12 months from $69,180 in 2023.
Among the many corporations that elevated their safety perks had been Centene, which supplies well being care companies to Medicare and Medicaid, and the chipmaker Intel.
This story was initially featured on Fortune.com
