CEOs Received Massive Pay Raises in 2023 While Employees Struggled Under Inflation

By: Julia Mehalko | Published: Jun 03, 2024

CEOs of companies in the S&P 500 have seen massive pay raises by almost 13% in 2023, according to new data. These top-earning CEOs include Hock Tan of Broadcom Inc., William Lansing of Fair Isaac Corp, and Ted Sarandos of Netflix. However, this data also showed that many of these CEOs’ employees have not seen huge wage gains.

This comes as many workers have explained that they are struggling with inflation, something that this new report points out.

CEOs See Pay Raises

A new data analysis conducted by Equilar has revealed that the median pay package CEOs received in 2023 rose by $16.3 million. This is about 12.6% up from what was seen the year prior.

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Many CEOs received higher pay raises in massive packages thanks to how boards have decided to reward those who lead their companies.

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How Companies Have Performed in 2023

For many of these companies in the S&P 500, they’ve seen CEOs manage to tout strong profits and soaring stock prices, even when certain aspects of the economy were worrisome last year.

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This pay package jump also comes after CEOs managed to deal with pandemic and post-pandemic problems. As a result of all of this, boards have decided to heavily reward those at the helm of the company.

Keeping CEOs Happy

Some analysts have stated that boards like to keep their CEOs happy, as they don’t want them to leave for a higher-paying opportunity when they’re doing well. Kelly Malafis, the founding partner of Compensation Advisory Partners in New York, further explained this move.

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“In this post-pandemic market, the desire is for boards to reward and retain CEOs when they feel like they have a good leader in place,” Malafis stated. “That all combined kind of leads to increased compensation.”

How Private Sector Workers Fared

While CEOs have seen their pay packages surge in just one year, their employees — private sector workers — haven’t seen nearly as much of a raise.

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According to the same data, these workers saw their wages and benefits rise by 4.1% in 2023.

The Difference Between Salaries

This latest report has also explained just how much of a difference now lies between CEOs and their average employee’s salary.

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Equilar found that it would take an average worker at one of these surveyed companies about 200 years to make what their CEO made in 2023. This data further indicated that this was the case at about half of the companies surveyed.

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Criticisms of CEOs and Their Pay Packages

This new data has already resulted in detractors voicing their opinions on the gap between what CEOs made and what their employees did last year.

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Some analysts have even stated that this inequality between the top executives and their average workers has led to many Americans becoming increasingly dissatisfied with the economy, even when it appears to be doing well by all economic accounts.

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Inflation Continues To Hurt Americans

This data has also come out during a time when Americans are increasingly frustrated with high inflation. Sarah Anderson, the director of the Global Economy Project at the Institute for Policy Studies, explained this situation.

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“Most of the focus here is on inflation, which people are really feeling, but they’re feeling the pain of inflation more because they’re not seeing their wages go up enough,” Anderson said.

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The Gap Widens

The gap between what CEOs earn and what their workers do has widened in 2023, as shown in this latest report.

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Now, about half of the surveyed CEOs have made at least 196 times what their average employee makes. That’s an increase, as last year’s data only found that they made 185 times more than their workers.

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Where the Gap Is the Widest

Interestingly, this data has also pointed to where this pay gap is seen to be the widest. Companies that have, on average, lower wages for employees have seen this widest gap.

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For example, Ross Stores’ average employees earn about $8,618. By comparison, their CEO Barbara Rentler’s compensation package was valued at $18.1 million in 2023.

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Higher Wages for Employees

While this gap between CEOs and their employees has widened when it comes to pay, many employees have been able to see higher wages in the last few years.

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Private sector employees have seen their benefits and wages rise with each past year. In 2023, it rose 4.1%, even after a 5.1% seen in 2022.

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Pressure on the Board

Even though CEO pay packages have been criticized in the past, many corporate boards will likely continue to push for these massive pay increases, simply because they feel pressure that high-performing CEOs will leave their position for an even higher paying position elsewhere.

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The worry that a CEO will leave for a rival company also helps fuel these pay packages. As a result, if a CEO performs well, then the board often votes to give them these rewards.

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