NEW YORK (AP) – The average compensation package for CEOs of companies on the S&P 500 surged nearly 10% in 2024. The stock market celebrated another exceptional year, resulting in a significant increase in corporate profits.
Many firms heed shareholder calls to align CEO compensation more closely with performance. Consequently, a substantial portion of the total compensation is derived from stock awards. CEOs are typically unable to cash in on these awards until they achieve certain performance targets, which generally relate to attaining a higher stock price or enhancing market value or operational profit.
The Associated Press CEO Remuneration Survey incorporates data from 344 executives and accounts for S&P 500 corporations that have submitted proxy statements between January 1 and April 30.
Here are some significant takeaways from the survey.
A fruitful year at the helm
The median CEO remuneration package climbed to $17.1 million, marking a 9.7% increase. In contrast, the median salary for employees at surveyed firms was $85,419—a modest 1.7% rise year-over-year.
Last year, CEOs faced challenges like stubborn inflation and relatively high interest rates, resulting in decreased consumer confidence. However, the economy also displayed encouraging trends. Consumers continued spending despite economic apprehensions, and inflation began to ease. The Federal Reserve lowered interest rates, while the job market remained robust.
The S&P 500, a crucial benchmark in the stock market, saw an increase of more than 23% last year, with firms within the index rising over 9%.
“With strong expectations for 2024, the nearly 10% increase in compensation reflects the timing of wage decisions,” stated Danladin, a partner at Compensation Advisory Partners. Sarah Anderson, head of the Global Economy Project at the Progressive Institute for Policy Research, observed that there has been a “long-term” upward trend in wages for workers, particularly those at the lower end of the pay scale. Yet, she noted that many individuals in wealthy nations continue to struggle to meet their financial obligations.
Leading earners
Rick Smith, the founder and CEO of Axon Enterprises, topped the survey with a package worth $164.5 million. Axon, known for manufacturing Taser stun guns and body cameras, achieved a record net profit of $377 million in 2024, with revenues increasing by more than 30% for the third consecutive year.
General Electric Co. CEO Lawrence Culp Jr. will sign a $52 billion contract by Emirates at the Dubai Air Show in Dubai, United Arab Emirates on Monday, November 13, 2023, to purchase a Boeing aircraft with GE Engine.
The vast majority of Smith’s compensation package consists of stock awards, contingent on achieving stock price and management-related objectives between 2024 and 2030. Other notable earners from the survey include CEO Lawrence Culp of General Electric, whose package amounted to $87.4 million; Apple’s Tim Cook with $74.6 million; and David Gitlin of Carrier Global at $65.6 million. The large portion of their compensation packages included stock or options awards.
According to the survey, the median stock awards increased nearly 15% last year, compared to a more modest 4% growth in base salary.
Tim Cook joins WSJ. Magazine Innovator will be awarding the award at the Museum of Contemporary Art in New York on Tuesday, October 29th, 2024. (Photo: Evan Agostini/Invision/AP, file)
“For CEOs, long-term incentive goals consistently see higher annual increases than base pay and bonuses,” stated Melissa Breck, a partner at the Compensation Advisory Partners. “This trend is understandable given the critical influence of long-term incentives on executive compensation.”
Jackie Cook from Morningstar Sustainalytics expressed that linking CEO pay to performance maintains a clear market signal that resonates with most shareholders. However, she cautioned that the increased reliance on stock-based compensation has led to “remarkable hikes” in CEO pay, closely tracking market performance while exacerbating wage disparities within companies.
Notably, some billionaire CEOs ranked lower in the AP survey. Warren Buffett’s compensation was approximately $405,000, about five times that of the average Berkshire Hathaway employee. Likewise, Elon Musk, according to Tesla’s proxy report, received no salary for 2024 but was offered a multi-year package estimated at $56 billion. This issue is currently part of ongoing litigation.
Other prominent CEOs were not included due to not meeting the survey criteria. Brian Niccol of Starbucks received a compensation package worth $95.8 million, but he became CEO on September 9. NVIDIA’s Jensen Huang saw his compensation rise to $49.9 million, but the company submitted its representation after April 30.
The pay gap
In half of the companies covered by the AP annual salary survey, the disparity indicates that a median employee would need to work nearly 192 years to earn what their CEO made in one year. Since 2018, firms have been mandated to disclose these pay ratios.
Typically, wage ratios are most pronounced in low-wage sectors. For instance, at Carnival Corp., the cruise line company, CEOs earn nearly 1,300 times the median wage of $16,900 for staff, while McDonald’s CEO’s pay is approximately 1,000 times that of the employees’ base pay. Both companies operate in multiple countries.
Overall, compensation and benefits for private-sector employees in the US rose by 3.6% as of 2024, per the Labor Bureau. The typical US worker earns $65,460 annually, which increases to $92,000 when factoring in benefits such as healthcare and insurance.
“The growing issue of excessive pay disparity continues to be a concern, with CEO compensation on the rise,” remarked Anderson. “These vast differences are not only unjust to lower-level employees contributing significantly to the firm’s value but also undermine the company’s effectiveness by diminishing employee morale and increasing turnover rates.”
Benefits for female CEOs
The median compensation for the 27 women included in the Associated Press survey (the highest number recorded since 2014) rose by 10.7% to $20 million, compared to a 9.7% increase for male counterparts, who averaged $16.8 million.
Leading the earnings among female CEOs was Judith Marks of Otis, with a compensation package of $42.1 million. The well-known manufacturer of elevators and escalators has reported operating profits exceeding $2 billion for the fourth year in a row. Approximately $35 million of Marks’ compensation came in the form of equity awards.
Other top earners among female CEOs included Jane Fraser from Citigroup ($31.1 million), Lisa Su from Advanced Micro Devices ($30.1 million), Mary Barra from General Motors ($29.5 million), and Laura Alber from Williams Sonoma ($27.7 million).
Christy Glass, a sociology professor at Utah State University studying equity, inclusion, and leadership, noted that while there may be a few additional women on the list of top CEOs, the overall stock performance has plateaued, especially as firms are cutting back on DEI initiatives.
“While the list might have a couple more names, it doesn’t significantly shift the dynamics,” she stated.
Emphasis on Security
Equilar has found that more companies are incorporating security measures into their executive compensation packages, likely in response to the December shooting incident involving United Healthcare CEO Brian Thompson.
An analysis of 208 S&P 500 companies that filed proxy statements by April 2 revealed that median security expenditures increased to $94,276 from $69,180 in 2023.
Companies that boosted their security offerings primarily include those providing healthcare services to Medicare, Medicaid, and even the technology firm Intel.
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Washington reporters Matt Ott and Chris Lugerber contributed.
Source: apnews.com