The typical CEO makes nearly 200 times more than their workers
Median CEO pay hit $16.3 million in 2023, or nearly 200 times the typical worker's wages for the year, according to data analyzed for The Associated Press by Equilar.
Typical compensation packages for chief executives who run companies in the S&P 500 rose nearly 13% last year, the AP reports. And roughly two dozen chief executives in the survey saw a pay bump of 50% or more.
Workers, on the other hand, saw wages rise by 5.2% in the last year, just above the rate of inflation, with some of the biggest gains going toward the lowest-paid workers. The median S&P 500 employee earned $81,467 in 2023.
A widening CEO-to-worker pay gap
The CEO-to-worker pay gap grew in the last year as company boards scrambled to keep executives from quitting and businesses fared well in the stock market. In 2022, CEOs made roughly 185 times their typical worker; with the jump in 2023 numbers, CEOs now make roughly 196 times their employees.
The disparity is largely driven by the fact that many top executives are paid based on how well their company performs, and stock awards make up roughly 70% of their total compensation packages.
CEO pay is generally decided on by shareholders, who in the last four years have overwhelmingly voted in support of executive compensation plans, according to Equilar data.
Top bosses haven't always made so much more than their workforce.
CEO pay has increased by 1,209% since 1978, compared with an 15% bump for the typical worker over this time period, according to the left-leaning Economic Policy Institute.
Typical worker wages have not increased as fast as CEO pay for a number of reasons, says Lawrence Mishel, a distinguished fellow at the EPI: high unemployment, globalization, the erosion of unions, low labor standards, the increase in noncompete clauses and domestic outsourcing, like shifting to a workforce of freelancers. Notably, the Federal Trade Commission recently voted to ban noncompete clauses, which impacts some 30 million American workers, though the move is facing legal action from business groups.
Whether CEOs are overpaid is "really up to shareholders to decide," says Amit Batish, the senior director of content and communications at Equilar.
"One may argue that paying a CEO adequately is critical to the success of an organization, ensuring long-term stability and growth, particularly during economic downturns," Batish tells CNBC Make It. If certain performance goals, especially financial growth, aren't met, shareholders might express their dissatisfaction by cutting compensation.
As it stands now, Batish expects CEO pay to continue to outpace growth in median worker pay but notes that CEO stock compensation isn't a guarantee — CEOs may not be able to cash in on their stock awards for years, if at all, unless they meet certain targets in their stock value or operating profits. Meanwhile, median employee pay is in cash salaries and bonuses, "making the comparison difficult at times."
That being said, "the value of stock awards can also appreciate over time, bringing even more value to executives, while the value of cash for employees contends with inflation," Batish says.
This widening gap could be a reason why Americans are dissatisfied with the economy, says Sarah Anderson, who directs the Global Economy Project at the progressive Institute for Policy Studies.
"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," Anderson told the AP.
The highest-paid CEOs
The highest-paid CEOs are concentrated in the communication services industry, the consumer defensive industry and health care. The CEO-to-worker pay gap is highest for retailers and other businesses where employees earn lower hourly wages.
The top-paid CEOs in the S&P 500, according to the AP survey, include Hock Tan of Broadcom Inc., with a compensation package valued close to $162 million; William Lansing of Fair Isaac Corp, or FICO ($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).
Of the 341 CEOs included in the data, 25 are women. The highest-paid female CEOs include Lisa Su of Advanced Micro Devices ($30.3 million); Mary Barra of General Motors ($27.8 million); and Jane Fraser of Citigroup ($25.5 million).
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