CEOs got big pay hikes in 2023, widening the gap with the workers they oversee

(AP Illustration/Peter Hamlin)
(AP Illustration/Peter Hamlin)AP Illustration/Peter Hamlin/AP

NEW YORK (AP) — The typical pay package for executives running companies in the S&P 500 rose nearly 13% last year, easily exceeding gains for workers at a time when inflation has put significant pressure on U.S. budgets.

The average compensation package for CEOs rose to $16.3 million, an increase of 12.6%, according to data analyzed by Equilar for The Associated Press. Meanwhile, wages and benefits for private sector workers rose 4.1% through 2023. At half of the companies in AP’s annual wage survey, it would take the worker in the middle of the company’s pay scale nearly 200 years to do what their CEO did.

“In this post-pandemic market, boards want to reward and retain CEOs when they feel they have a good leader,” said Kelly Malafis, founder of Compensation Advisory Partners in New York.

Article continues below this ad

AP’s CEO Compensation Survey included pay data from 341 executives at S&P 500 companies who served at their companies for at least two full consecutive fiscal years and who filed proxy statements between January 1 and April 30.

Broadcom CEO Hock Tan topped the AP investigation with a pay package worth about $162 million.

Broadcom on October 31, 2022 awarded Tan shares worth $160.5 million for the company’s 2023 fiscal year. Tan was offered the opportunity to earn up to 1 million shares starting in fiscal 2025, according to a securities filing, provided Broadcom’s shares meet certain targets — and he remains CEO for five years.

At the time of the grant, Broadcom’s shares were trading at $470. The stock has skyrocketed since then, reaching an all-time high of $1,436.17 on May 15. Tan will receive the full price if the average closing price is at or above $1,125 for 20 consecutive days between October 2025 and October 2027.

Article continues below this ad

Broadcom noted that under Tan, its market value has risen from $3.8 billion in 2009 to $645 billion (as of May 23) and that total shareholder returns easily surpassed that of the S&P 500 during that period.

Other CEOs topping the AP survey include William Lansing of Fair Isaac Corp, ($66.3 million); Tim Cook of Apple Inc. ($63.2 million); Hamid Moghadam of Prologis Inc. ($50.9 million); and Ted Sarandos, co-CEO of Netflix ($49.8 million).

Lisa Su, CEO of chipmaker Advanced Micro Devices, was the highest-paid female CEO in the AP survey for the fifth year in a row in fiscal 2023, with compensation worth $30.3 million – the same as her 2022 pay package. Her overall ranking rose from 25 to 21.

Workers across the country have seen higher wages since the pandemic, with wages and benefits for private sector workers rising 4.1% in 2023 after a 5.1% increase in 2022, according to the Department of Labor .

Article continues below this ad

Even with these gains, the gap between the person in the corner office and everyone else continues to widen. Half of CEOs in this year’s pay survey earned at least 196 times what their average worker earned. That’s up from 185 times in last year’s survey.

The difference between what the CEO earns and what the employees earn was not always so great.

After World War II and into the 1980s, CEOs of large publicly traded companies earned about 40 to 50 times the average wage of employees, says Brandon Rees, deputy director of corporate and capital markets for the AFL-CIO, which runs an Executive Paywatch website manages. that tracks CEO compensation.

“The (current) pay ratio suggests a kind of ‘winner-take-all’ culture, where companies treat their CEOs as, you know, as superstars rather than as team players,” Rees said.

Article continues below this ad

Despite the criticism, shareholders tend to give overwhelming support to compensation packages for company executives. According to Equilar data, companies typically received just under 90% of votes for their executive compensation plans between 2019 and 2023.

However, shareholders occasionally reject a compensation plan, although the vote is not binding. In 2023, shareholders of 13 companies in the S&P 500 gave the pay package less than 50% support.

Sarah Anderson, who directs the Global Economy Project at the progressive Institute for Policy Studies, said Say on Pay votes are important because they “shine a spotlight on some of the most egregious cases of executive access, and it can lead to negotiations over compensation and other issues that shareholders may wish to raise with corporate leadership.”

After investors again praised executive compensation packages, Netflix met with many of its largest shareholders last year to discuss their concerns.

Article continues below this ad

Following the talks, Netflix announced several changes to reshape its compensation policy. First, it eliminated managers’ choice to split their compensation between cash and options. Stock options, which can give managers a payday as long as the stock price remains above a certain level, will no longer be issued. Instead, the company will provide restricted stock that managers can only benefit from after a certain period of time or after certain performance measures have been met.

The changes will come into effect in 2024.

More generally, votes on wages, for example, haven’t made a big difference, Anderson says. “I think in some cases the impact, certainly on the overall size of CEO packages, has not had much effect.”

Article continues below this ad

Ortutay reported from San Francisco. Reporters Stan Choe and Ken Sweet contributed.