CEOs earn more because they have influence over corporate boards, not due to their skills or contributions. High CEO pay has increased inequality over the years by boosting the earnings of other top earners and leaving less for regular workers.
Bernard Arnault, CEO of LVMH, became the world’s richest person, passing Elon Musk.
According to Forbes, Arnault’s net worth rose to $207.6 billion after a $23.6 billion increase. Musk’s net worth dropped by 13%, falling to $204.7 billion, with a loss of over $18 billion.
To show how much billionaire CEOs really earn, Texting.io created a calculator. It lets users compare their salary or expenses to how quickly CEOs like Jeff Bezos, Elon Musk, Mark Zuckerberg, and Susan Wojcicki earn or pay them off.
The tool shows how much these CEOs make per year, day, hour, and minute. To use it, pick a CEO and an expense type from the menu. Then, enter your salary, mortgage, or student loan debt to see how fast these CEOs could match or pay your amount.
CEO Compensation Trends
1978–2023 [Growth of CEO compensation]
CEO compensation is mostly stock-based, so its value changes often and is hard to calculate exactly. Two measures are used: realized compensation (backward-looking) and granted compensation (forward-looking).
From 1978 to 2023, realized CEO pay rose 1,085% (inflation-adjusted), while a typical worker’s pay grew just 24%. CEO granted pay increased by 932% over the same period.
1965–2023 [CEO-to-worker compensation ratio]
In 2023, the realized CEO-to-worker pay ratio was 290-to-1, much higher than the 21-to-1 ratio in 1965. Over the last 20 years, this ratio has stayed far above levels seen from the 1960s to the early 1990s.
The granted CEO-to-worker pay ratio in 2023 was 192-to-1. This is lower than the peak of 398-to-1 in 2000 but still much higher than the 45-to-1 ratio in 1989 or the 15-to-1 ratio in 1965.
Composition of CEO Compensation
Stock-related pay makes up a big and growing part of CEO compensation. There is now less focus on stock options and more on stock awards, which better align with long-term goals.
In 2006, stock options were over 70% of stock-related CEO pay. By 2023, they dropped to 22%, with stock awards making up the rest. On average, stock-related pay was $16.7 million in 2023, making up 77.6% of total realized CEO compensation.
Compensations Of FTSE 100 Cheifs In The UK [Key Insights]
- FTSE 350 executives, excluding CEOs in FTSE 100, earn £1.3m on average. They only need to work until 10 January to surpass the average worker’s pay.
- Partners at “magic circle” law firms earn £1.9m on average and will overtake the average worker by 8 January.
- Partners at “big four” accountancy firms earn £870,000 on average and will match the average worker’s pay by 16 January.
- Top bankers at the UK’s largest banks earn £807,000 on average and will also surpass the average worker by 16 January.
- The top 1% of full-time UK earners, making at least £145,000, will earn more than the median full-time worker by 29 March.
Is it justified?
In a Harvard Business School article, Ethan Rouen, a business professor, said companies must explain pay gaps to the public and workers.
“When people see how much a CEO earns, they will find it shocking and react strongly,” Rouen said.
It’s up to companies to provide a reason for the pay gap and offer a clear explanation.
He referenced a 2014 survey in which people across several countries said CEOs should earn no more than four times the average worker’s salary. However, Rouen argues that pay differences should be viewed in a broader context beyond averages.
