US Large Company CEO Compensation Increased by 7.7% Last Year... Doubling the Pay Increase Rate of Regular Employees

[Financial News]  




The compensation of CEOs of the 500 largest companies included in the Standard & Poor's (S&P) 500 index of the New York Stock Exchange increased by 7.7% last year.

This is the steepest increase in three years since the 11.5% rise in 2021.

It was more than double the 3.6% pay increase rate for US workers.

The Financial Times (FT) reported this on the 19th (local time), citing data from the salary consulting firm Pearl Meyer Advisors.

According to Pearl Meyer, the median compensation for CEOs of 500 large US companies last year, including salary, stock options, and bonuses, was $19 million (approximately 26.47 billion won). It surpassed the 7.2% compensation increase rate in 2023.

According to the US Department of Labor's Bureau of Labor Statistics (BLS), the total compensation for US workers increased by only 3.6% during the same period.

Pearl Meyer Chief Data Officer (CDO) Eric Hoffman said, "Executive compensation continues to grow ahead of inflation and the pay increase rate for regular employees."

The CEO who received the most compensation last year was Rick Smith, CEO of Axon Enterprise, a taser gun company. Smith received a total of $164.5 million, thanks to achieving performance targets over the past few years, which earned him substantial stock options.

Starbucks CEO Brian Niccol also received $95.8 million, mainly from stock options, ranking second.

Niccol's compensation includes a $5 million bonus under his CEO contract and stock options he received while at Chipotle.

The labor sector is protesting.

The AFL-CIO, the largest labor federation in the US, points out that Niccol's compensation starkly shows the severe pay gap between regular employees and executives among the largest companies in the US.

According to Starbucks' disclosure, Niccol's annual salary is 6,666 times that of regular employees and part-time baristas. Part-time baristas earn about $15,000 annually.

Karin Zelenko, Director of Capital Strategies at AFL-CIO, criticized, "Income inequality in this country continues to grow, and workers are finding it increasingly difficult to make ends meet."

Sarah Anderson, Director of the Global Economy Project at the Institute for Policy Studies (IPS), a nonprofit economic analysis institute, warned that the widening wage gap between executives and regular employees also negatively impacts democracy.

Anderson said, "The pay gap between CEOs and workers increases inequality and is a key driver of wealth concentration among the highest income brackets," adding, "There are increasingly more signs of how the ultra-wealthy exert excessively high influence on our political system."

However, such pay gaps between executives and regular employees are particularly severe in low-productivity retail sectors and relatively small in high-tech companies like Nvidia, where the performance of regular employees is important.

In the case of Nvidia, the most expensive company in the US, the pay gap ratio between executives and regular employees is about 166 to 1.

Last year, CEO Jensen Huang received a total of $49.9 million, and the median employee salary was $301,233.

Meanwhile, since company performance is often dependent on executives, shareholders are positive about generous compensation for executives.

According to an ISS-Corporate survey, shareholders have overwhelmingly supported executive compensation packages over the past five years. The median support rate has ranged from 92.4% to 92.6% over the past five years.

On the 4th, when a large new compensation package for Tesla CEO Elon Musk was announced, Tesla's stock price jumped 2.2%, and after riding the upward trend, it surged 12.6% over seven trading days until the 12th.

dympna@fnnews.com Song Kyung-jae Reporter