The median compensation for S&P 500 company CEOs increased by 10% during 2024 because stock markets expanded and corporate profits rose according to Equilar data for the Associated Press.
The executive compensation packages reached $16.3 million and performance-based stock awards composed the main portion of total compensation. Most CEOs earn their pay primarily from equity instruments that only become valuable when specific financial and market criteria are achieved thus creating direct connections between executive compensation and shareholder returns.
Executive compensation increased following a remarkable year for American stock markets where both the S&P 500 achieved multiple all-time highs and corporate profits recovered from the pandemic-related slowdown. The productivity improvements and aggressive cost reductions combined with steady consumer demand contributed to firm performance.
CEO compensation continues to increase beyond worker compensation rates according to Sarah Anderson who leads the Global Economy Project at the Institute for Policy Studies. The trend shows boards using market value and earnings growth metrics to determine executive compensation but the gap between CEO and worker salaries remains substantial.
Equilar studied proxy statements from 344 CEOs who worked for at least two full fiscal years at their firms during the period from January 1 to April 30. The data demonstrated that rising stock prices generated substantial value for equity-based compensation packages.
The top-paid executives worked in technology and healthcare industries at companies such as Nvidia along with Eli Lilly and Meta Platforms which achieved record-breaking market success. Performance-based stock grants at certain firms experienced significant value growth because companies exceeded their aggressive internal targets.
The growing executive-average worker pay gap reaching over 300 to 1 ratio at multiple firms leads critics to demand better governance and transparency measures according to their view. The topic has become a major focus among activist investors and labor unions because inflation is reducing the financial stability of households.
The board of directors defends CEO compensation review by investors because they believe linking executive pay to long-term value creation remains crucial to maintain top talent in the competitive business environment.
Executive compensation is expected to maintain its elevated level during 2025 because markets remain strong while equity-based incentives continue to dominate pay structures.
