Chief executive officer pay for companies in the S&P 500 reached a record high in 2023, fueled by a surge in performance-linked compensation plans modeled after those popularized by Tesla’s Elon Musk.
Total CEO compensation rose 12.6% year-over-year to an average of $16.3 million, according to preliminary data from executive pay consultancy Equilar. The increase outpaced the 8.9% gain in median worker pay at the same firms, highlighting a widening gap in earnings between executives and rank-and-file employees.
The growth in CEO pay was underpinned by a shift toward long-term incentive plans tied to stock performance, a trend accelerated by high-profile compensation structures at companies such as Tesla and other tech firms. Performance-based stock awards accounted for 78% of total CEO pay in 2023, up from 72% in 2022, Equilar found.
Musk’s own compensation package at Tesla, valued at over $55 billion in 2018, remains one of the most scrutinized examples of performance-linked pay. The plan, which vests only if Tesla meets ambitious market capitalization and revenue milestones, has since influenced compensation frameworks across industries, particularly in technology and energy sectors.
Critics argue that the expansion of such plans may disproportionately reward executives during periods of strong stock market performance while shielding them from downside risks. Proponents counter that performance-based incentives align CEO interests with those of shareholders by tying compensation directly to company valuation and growth metrics.
The data follows broader discussions on executive pay transparency and income inequality, with regulators and investors increasingly scrutinizing compensation practices. Shareholder advocacy groups have pushed for stricter disclosure requirements and limits on non-performance-based pay components.
The Equilar report is based on a sample of 425 S&P 500 companies that have disclosed CEO pay data for fiscal year 2023. The final figures may be adjusted as additional filings are released in the coming weeks.
