CEO pay in the US rose nearly 10% in 2024

The typical compensation package for chief executives who run companies in the S&P 500 jumped nearly 10 per cent in 2024 as the stock market enjoyed another banner year and corporate profits rose sharply.

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 Associated Press’ CEO compensation survey, which uses data analysed for The AP by Equilar, included pay data for 344 executives at S&P 500 companies who have served at least two full consecutive fiscal years at their companies, and which filed proxy statements between January 1 and April 30.

The median pay package for CEOs rose to US$17.1 million, up 9.7 per cent. Meanwhile, the median employee at companies in the survey earned US$85,419, reflecting a 1.7 per cent increase year over year.

CEOs had to navigate sticky inflation and relatively high interest rates last year, as well as declining consumer confidence. But the economy also provided some tail winds: Consumers kept spending despite their misgivings about the economy; inflation did subside somewhat; the Fed lowered interest rates; and the job market stayed strong.

The stock market’s main benchmark, the S&P 500, rose more than 23 per cent last year. Profits for companies in the index rose more than 9 per cent.

Rick Smith, the founder and CEO of Axon Enterprises, topped the survey with a pay package valued at US$164.5 million. Axon, which makes Taser stun guns and body cameras, saw revenue grow more than 30 per cent for three straight years and posted record annual net income of US$377 million in 2024. Axon’s shares more than doubled last year after rising more than 50 per cent in 2023.

Almost all of Smith’s pay package consists of stock awards, which he can only receive if the company meets targets tied to its stock price and operations for the period from 2024 to 2030. Companies are required to assign a value to the stock awards when they are granted.

Other top earners in the survey include Lawrence Culp, CEO of what is now GE Aerospace (US$87.4 million), Tim Cook at Apple (US$74.6 million), David Gitlin at Carrier Global (US$65.6 million) and Ted Sarandos at Netflix (US$61.9 million). The bulk of those pay packages consisted of stock or options awards.

The median stock award rose almost 15 per cent last year compared to a four per cent increase in base salaries, according to Equilar.

Some well-known billionaire CEOs are low in the AP survey. Warren Buffett’s compensation was valued at US$405,000, about five times what a worker at Berkshire Hathaway makes. According to Tesla’s proxy, Elon Musk received no compensation for 2024, but in 2018 he was awarded a multiyear package that has been valued at US$56 billion and is the subject of a court battle.

Other notable CEOs didn’t meet the criteria for inclusion the survey. Starbucks’ Brian Niccol received a pay package valued at US$95.8 million, but he only took over as CEO on September 9. Nvidia’s Jensen Huang saw his compensation grow to US$49.9 million, but the company filed its proxy after April 30.

At half the companies in AP’s annual pay survey, it would take the worker at the middle of the company’s pay scale 192 years to make what the CEO did in one. Companies have been required to disclose this so-called pay ratio since 2018.

The pay ratio tends to be highest at companies in industries where wages are typically low. For instance, at cruise line company Carnival Corp, its CEO earned nearly 1,300 times the median pay of US$16,900 for its workers. McDonald’s CEO makes about 1,000 times what a worker making the company’s median pay does. Both companies have operations that span numerous countries.

Overall, wages and benefits netted by private-sector workers in the United States rose 3.6 per cent through 2024, according to the US Labor Department. The average worker in the US makes US$65,460 a year. That figure rises to US$92,000 when benefits such as health care and other insurance are included.

For the 27 women who made the AP survey — the highest number dating back to 2014 — median pay rose 10.7 per cent to US$20 million. That compares to a 9.7 per cent increase to US$16.8 million for their male counterparts.

The highest earner among female CEOs was Judith Marks of Otis Worldwide, with a pay package valued at US$42.1 million. The company, known for its elevators and escalators, has had operating profit above US$2 billion for four straight years. About US$35 million of Marks’ compensations was in the form of stock awards.

Other top earners among female CEOs were Jane Fraser of Citigroup (US$31.1 million), Lisa Su of Advanced Micro Devices (US$31 million), Mary Barra at General Motors (US$29.5 million) and Laura Alber at Williams-Sonoma (US$27.7 million).

Christy Glass, a professor of sociology at Utah State University who studies equity, inclusion and leadership, said while there may be a few more women on the top paid CEO list, overall equity trends are stagnating, particularly as companies cut back on DEI programmes.

“There are maybe a couple more names on the list, but we’re really not moving the needle significantly,” she said.

AP