Benjamin Franklin’s timeless assertion from 1789 about the certainties of life—death and taxes—might require a modern update if he were alive today. In our contemporary landscape, alongside these age-old certainties, we witness another phenomenon: the ever-escalating compensation of chief executive officers (CEOs).
According to a recent study by Equilar, median pay for America’s top CEOs surged by 11.4% in 2023, reaching an unprecedented $23.7 million. This uptick, however, conceals nuanced patterns beneath the surface. The CEO pay surge surpasses both the 3.4% inflation rate and the 4.3% increase for the average worker in 2023. Equilar’s study focuses on CEO compensation at companies with revenues exceeding $1 billion, based on filings submitted to the Securities and Exchange Commission by March 31, reflecting data from 2023.
Jonas Johnson, Vice President of Research at the Economic Research Institute, reflects on the sustainability of this trend: “Will the trend of outsize salary increases for CEOs continue into the future? It can’t forever. Twenty, thirty years of 8% gains, you’re looking at double in compensation every seven years, and that can only go on for so long. At some point, the numbers become unsustainable.”
Despite these warnings, the current trajectory persists.
Amit Batish, Senior Director of Content at Equilar, observes a notable shift in CEO compensation structure: “Stock awards are now the bread and butter of CEO comp. This year we had three nine-figure award packages; last year we had only one. So we will probably see more.” The rising popularity of stock awards can be attributed to their inherent value proposition: while these grants offer executives significant potential upside if the company’s stock performs well, they retain value even in the event of a stock downturn. In contrast, stock options, once favored, become worthless if the stock price declines.
