CEOs are enjoying substantial pay packages as the US stock market thrives, creating a growing disparity between executive and employee compensation.
According to an analysis by Equilar and The Associated Press, the median CEO in the S&P 500 was paid 196 times the median employee salary in 2023, up from a ratio of 185 in 2022. This increase is driven by CEO pay, which is closely tied to rising share prices, outpacing the salary growth of regular employees.
In 2023, the median total compensation for S&P 500 CEOs, including stock awards, surged to $16.3 million, a significant 12.6% year-over-year increase compared to a mere 0.9% rise in 2022. Conversely, the median S&P 500 employee earned $81,467 last year, a 5.2% increase from 2022. This translates to an annual pay hike of about $4,300 for workers, compared to an extra $1.5 million for CEOs.
Employees are struggling with high costs for essentials like groceries, daycare, and car insurance, despite paychecks growing faster than prices. According to Moody’s Analytics, Americans are spending $1,015 more per month than in 2021 for the same goods and services, almost offsetting the income increase of $1,109 per month over the same period.
CEO compensation is heavily influenced by the stock market, with stock awards comprising about 70% of total compensation last year. The rising stock market boosted the median stock award by 10.7% to $9.4 million. In 2023, the S&P 500 surged 24%, and the Nasdaq soared 43%, driven by the artificial intelligence boom. Although inflation has hindered the Federal Reserve from lowering rates this year, the S&P 500 has climbed another 11%, suggesting even higher CEO pay packages in the future.
Broadcom (NASDAQ:AVGO) CEO Hock Tan received the highest total pay in the S&P 500, earning $161.8 million last year, primarily from stock awards as Broadcom’s share price nearly doubled. This left Tan with a pay ratio of 510 times the median salary of Broadcom employees. FICO (NYSE:FICO) CEO William Lansing and Apple (NASDAQ:AAPL) CEO Tim Cook were the next highest-paid CEOs, earning $66.3 million and $63.2 million, respectively.
At companies relying on hourly, part-time workers, the pay gap is even more pronounced. Ross Stores (NASDAQ:ROST) CEO Barbara Rentler received $18.1 million in total compensation last year, while the median Ross employee, a part-time hourly retail store associate, made $8,618, resulting in a pay ratio of 2,100 times.
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