CEO pay rising, gap with workers widening

NEW YORK

The typical compensation package for chief executives who run companies in the S&P 500 jumped nearly 13 percent last year, easily surpassing the gains for workers at a time when inflation was putting considerable pressure on Americans’ budgets.

The median pay package for CEOs rose to $16.3 million, up 12.6 percent, according to data analyzed for The Associated Press by Equilar.

Meanwhile, wages and benefits netted by private-sector workers rose 4.1 percent through 2023. At half the companies in this year’s pay survey, it would take the worker at the middle of the company’s pay scale almost 200 years to make what their CEO did.

CEOs got rewarded as the economy showed remarkable resilience, underpinning strong profits and boosting stock prices. After navigating the pandemic, companies faced challenges from persistent inflation and higher interest rates. About two dozen CEOs in the AP’s annual survey received a pay bump of 50 percent or more.

“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 in New York. “That all combined kind of leads to increased compensation.”

But Sarah Anderson, who directs the Global Economy Project at the progressive Institute for Policy Studies, believes the gap in earnings between top executives and workers plays into the overall dissatisfaction among Americans about the economy.

“Most of the focus here is on inflation, which people are really feeling, but they’re feeling the pain of inflation more because they’re not seeing their wages go up enough,” she said.

Many companies have heeded calls from shareholders to tie CEO compensation more closely to performance. As a result, a large proportion of pay packages consist of stock awards, which the CEO often can’t cash in for years, if at all, unless the company meets certain targets, typically a higher stock price or market value or improved operating profits. The median stock award rose almost 11 percent last year compared to a 2.7 percent increase in bonuses.

Hock Tan, the CEO of Broadcom Inc., topped the AP survey with a pay package valued at about $162 million.

Other CEOs at the top of AP’s survey are William Lansing of Fair Isaac Corp, ($66.3 million); Tim Cook of Apple Inc. ($63.2 million); Hamid Moghadam of Prologis Inc. ($50.9 million); and Ted Sarandos, co-CEO of Netflix ($49.8 million).

At Apple, Cook’s compensation represented a 36 percent decline from the year prior. Cook requested a pay cut for 2023, in response to the vote at Apple’s 2022 annual meeting, where just 64% of shareholders approved of his pay package.