Why CEO pay in the US is rising at the fastest pace in four years

Why CEO pay in the US is rising at the fastest pace in four years

America's best corporate leaders saw their compensation rise 7.7 per cent in 2024, the largest four-year-high in increase. Overall median pay for S&P 500 CEOs went to $19mn, according to data from consultant Farient Advisors. The rise was greater than 7.2 per cent in 2023 and significantly more than 3.6 per cent in overall U.S. employee earnings monitored by the Bureau of Labor Statistics, the Financial Times stated.

Record-breaking packages at the very pinnacle

The highest-paid S&P 500 boss of last year was Axon Enterprise head Rick Smith, who received $164.5mn in performance-based stock awards. Next was his colleague and Starbucks CEO Brian Niccol with $95.8mn, backed up by exceptional stock awards and a $5mn exit bonus for leaving Chipotle. These types of packages have inflamed arguments over whether board-approved awards are being tied to shareholder value creation or simply widening the inequality gap.

The growing pay divide

Workers' unions and policy experts warn the astronomical salaries of CEOs are increasing inequality. At Starbucks, the chain's median worker—a part-time barista who takes home some $15,000 a year—made 6,666 times less than Niccol in 2024. Sarah Anderson of the Institute for Policy Studies replied that such disparities collect wealth and political influence at the top and at the expense of democratic accountability. Unions have said the same thing, pointing to rising worker insecurity as executives pile up the dough.

Contrasts within industries

Pay ratios vary widely by industry group. Technology firms, with their better-paid engineers, generally have narrower gaps than retailers and service firms that have lower-paid part-time and hourly employees. Nvidia, the biggest US firm, reported a ratio of 166 to 1, with median employee pay of $301,233 compared with CEO Jensen Huang's $49.9mn compensation package. The disparity reveals how business models generate the perception of compensation inequality.

Strong shareholder support

Against popular backlash, investors continue to endorse executive pay. Proxy consultant ISS-Corporate stated that median shareholder endorsement of compensation plans has remained stable at approximately 92.5 per cent over the past five years. It has been stated by analysts that provided that corporations deliver returns, boards face limited opposition to outlandish packages. However, pay specialists caution that persistent economic anxiety may restrain the growth of CEO pay in future years.

An argument with staying power

Executive pay has been a contentious issue in American business for decades, but the magnitude of recent increases has reignited arguments over fairness and accountability. Boards point to pay as a means of luring and keeping stars, but critics call it symptomatic of a systemic imbalance of corporate wealth distribution. With shareholder approval still strong, backing for increasing pay appears unbroken—though political and social pushback is unlikely to fade.