Here’s how executive and CEO compensation works-awdailynews

webadmin

2025-09-23

Here’s how executive and CEO compensation works

CEO pay at top American companies rose to a median of $16.8 million in 2024. This was a 7.4% rise from just the year before, and it’s part of a long-term trend that’s been going on for decades. Meanwhile, the average worker’s pay rose by less than 4% in the same period, which is not enough to keep up with inflation.

Numbers like these matter in debates about inequality, corporate governance, and worker morale. This article breaks down how executives are paid, how their pay has changed over time, and how it stacks up against worker pay, using recent figures.

Worker counting cash — Photo By: Kaboompics.com via Pexels

Executive pay can be structured in dozens of different ways, and a typical package has several parts:

Base salary. This is a fixed annual payment that’s just like a normal paycheck, but it can run from $1 a year to hundreds of thousands or millions of dollars.
Bonuses. These are usually tied to annual performance.
Stock awards. Executives can be given grants of company shares.
Stock options. Options are rights to buy shares later at an agreed-upon price.
Perks. These are extras like free or discounted security or travel.

Performance-based pay often ties compensation to company stock performance, total return, or financial targets. This links executive rewards to shareholder value. Compensation decisions are made by a board compensation committee, often supported by external consultants, with some input from shareholders and investor advisors.

Long-term trends show a sharp and widening gap between executive pay and worker pay.

In 1965, CEO-to-worker compensation was about 21-to-1. By 2023, it reached 290-to-1. Granted compensation stood at 192-to-1 in 2023, down from a peak of 398-to-1 in 2000.
From 1978 to 2023, CEO pay grew 1,085% , while typical worker compensation rose just 24%.

This divergence reflects factors beyond inflation. Worker wages have generally lagged behind both executive pay and overall productivity gains. Stock-based compensation, bonuses, and long-term incentive plans have increasingly driven CEO pay.

Other top earners — such as senior lawyers, investment bankers, and elite engineers — have not kept pace with the earnings trajectory of CEOs. In fact, over the first three decades of the 21st century, CEO compensation grew far faster than compensation for the top 0.1% of wage earners.

This suggests that the phenomenon is not simply about the rich getting richer — it’s about CEOs pulling away from even their fellow high-income peers. While top professionals in other sectors have enjoyed healthy earnings growth, their compensation has generally tracked broader economic trends, market conditions, and personal productivity. In contrast, CEO pay structures have increasingly been tied to equity grants, performance shares, and other forms of compensation that can scale exponentially when stock prices rise.

This divergence means that the financial rewards of being at the very top of a corporate hierarchy have expanded far beyond what is typical even among the wealthiest professionals. It also raises questions about whether CEO pay is still rooted in competitive labor market forces — or if it reflects unique leverage over boards, pay committees, and compensation design itself.

Worker pay has shown modest growth in recent years, with increases that often fail to keep pace with inflation. Median worker compensation rose by just 3%-4% recently, and private-sector wages increased 3.6% in 2024. While these numbers might seem positive at first glance, the reality is that rising costs for essentials such as housing, health care, and groceries have eroded much of these gains in real terms.

In contrast, S&P 500 CEOs saw nearly a 10% increase in median pay to $17.1 million in 2024, highlighting a stark divide between corporate leadership and the broader workforce. The gap between CEO pay and worker pay continues to widen, fueling concerns about income inequality and the sustainability of current compensation practices.

For many employees, stagnant wages translate to diminished purchasing power, limited savings potential, and increased financial stress. This imbalance also risks undermining workplace morale, fostering resentment, and reducing long-term employee loyalty.

Here are some of the most highly compensated executives based on public disclosures. These individuals often lead some of the world’s largest corporations, overseeing operations that generate billions in revenue and affect markets across the globe.

Executive pay usually includes more than just a base salary — stock awards, performance-based bonuses, and other incentives often make up the bulk of their total compensation.

Many of these leaders’ earnings are tied to company performance, aligning their financial rewards with shareholder value. However, their pay packages frequently spark debate about income inequality, corporate governance, and whether results justify top-tier compensation.

In certain cases, executives earn more in a single year than most employees will make in a lifetime, making these figures both impressive and controversial. Looking at who earns the most — and how they earn it — offers insight into broader trends in business, leadership, and the modern economy. Even in a crowded field, these executives stand out:

James Anderson, Coherent. $101.5 million in total compensation in 2024. Nearly all came from stock awards, and his package far exceeded the median CEO pay of $25.6 million.
Rick Smith, Axon Enterprise. $165 million in compensation in 2024, mostly performance-based stock awards. This made Smith the only S&P 500 CEO to top $100 million.
Patrick W. Smith, Axon Enterprise. $164.5 million in 2024, almost entirely via long-term stock awards.
Brian Niccol, Starbucks. $97.8 million in total compensation in 2024, equivalent to 6,666 times the median Starbucks employee’s pay.