The annual tallies of chief executive pay for 2023 have arrived and they are fascinating and irritating, in equal measure.
There is already so much evidence that C.E.O.s are earning a ton of money — while most employees are not — that these annual revelations can’t be called shocking news.
But this year, there’s a new wrinkle: Companies must disclose how much C.E.O. stock holdings increase when the market rises. By that measure, too, chief executives are amassing extraordinary wealth.
From any angle, the specifics are eye-popping.
In 2023, using traditional measures of executive pay, four chief executives of publicly traded companies were each rewarded with more than $150 million:
Jon Winkelried of TPG, a private equity company.
Harvey Schwartz of the Carlyle Group, is also a private equity firm.
Hock Tan of Broadcom, a semiconductor and data-center giant.
Nikesh Arora of Palo Alto Networks, a global cybersecurity company.
Plus, new rules stemming from the Dodd-Frank law of 2010 have gone into effect. They focus on how the market changes executive pay each year, yielding the second highest-paid C.E.O. list.
These new numbers — called compensation actually paid (CAP) — are often even bigger than the traditional chief executive payday bonanzas. That’s the case for a man whose outsize pay is already a major issue for his company: Elon Musk of Tesla, who gained $1.4 billion in 2023 — more than any other C.E.O.
But that stunning figure is only theoretical and based largely on a stock that Mr. Musk no longer has a legal claim to. The holdings reflect an earlier $46.5 billion pay package that a judge in Delaware has voided, and that Mr. Musk is fighting to reclaim. Tesla shareholders are set to vote on Mr. Musk’s pay on June 13, and court battles are likely to continue for a long while.
So now we have two complete data sets using distinct and complementary analytical methods, both demonstrating what we’ve always known: It’s good to be the boss.
But how good, exactly? C.E.O. pay data, gleaned from the filings of all publicly traded companies and assembled at my request by the executive compensation research firm Equilar, provided fresh answers.
Traditional Pay
First, consider the longstanding methods for assessing executive compensation required by Dodd-Frank. Publicly traded U.S. companies must disclose top executives’ salaries, the value of newly granted stock and options, and an assortment of miscellaneous perks like personal security guards or corporate jets.
I’ll call this entire approach Traditional Pay, though there’s nothing traditional about it for those of us who take the train or subway to work and will never receive pay packages with nine figures.
Using Traditional Pay, Equilar identified the 100 highest-paid C.E.O.s at public companies in 2023. The median pay for these executives — the midpoint, where half of the compensation packages are lower and half are higher — was more than $29 million.
Thanks to Dodd-Frank, we also know that the median pay of employees at these companies was around $100,000, and the median C.E.O.-to-worker pay ratio was about 300 to one.
Let’s translate that.
It means that for an average employee at one of these companies to earn as much as the C.E.O., she would have to transcend the human lifespan and toil for 300 years. And consider this: The American worker’s average annual wage in 2023 was only $65,470, according to the Bureau of Labor Statistics. At that wage, it would take 445 years to earn as much as the middle-of-the-road chief executive on this list.
Top of the Heap
What about the C.E.O. at the very top? For 2023, that would be Mr. Winkelried of TPG, whose compensation was $198,685,926. The median pay of TPG employees was high, too: $290,997. Even so, it would take them 683 years to earn what Mr. Winkelried made in one year. And for people with average American paychecks? More than 3,000 years.
Pay ratios on this scale reflect levels of income inequality that were widely viewed as abhorrent 50 years ago. Last year, I pointed out that the American social structure was flatter and C.E.O.-worker pay ratios were lower in the 1970s and 1980s. I noted last week that income inequality was an important cause of Social Security’s financial problems because high earners were increasingly protected from taxation by the income cap for the Social Security payroll tax.
Through the 1970s, one study found, the C.E.O.-worker pay ratio for big companies was less than 20 to one. In the 1980s, Peter F. Drucker, the economist, and Wall Street Journal columnist, cited research showing it felt “about right” when C.E.O.s received 10 to 12 times what workers earned. He said pay ratios as high as 20 to one might be all right for workplace morale and social cohesion, though that was stretching it.
But paying the C.E.O. hundreds of times more than workers earned? That was out of the question then, though it is now standard practice for many big publicly traded companies.
Using Traditional Pay metrics, the second-most highly paid C.E.O. in 2023 was Mr. Schwartz of the Carlyle Group. He earned $186,994,098 — 813 times what the median Carlyle employee received. Right below him on the list was Mr. Tan of Broadcom. He got $161,826,161. The pay ratio at Broadcom was 510 to one.
The highest-ranked woman on the list was Sue Nabi of Coty, the beauty products company. She was in fifth place, with a total compensation of $149,429,486. The median worker at Coty earned $39,643. That combination produced the highest pay ratio in the Traditional Pay list: 3,769 to one, meaning that Coty employees would need to work for more than 3,769 years to earn what she received in just one year.
Here are highlights of this list:
Who Was Granted the Most Last Year
Top 10 U.S. chief executives by compensation granted in 2023. “Pay ratio” is C.E.O. total relative to the median worker’s pay.
A New Approach
Twelve years after the enactment of Dodd-Frank, the Securities and Exchange Commission approved additional rules for assessing C.E.O. pay. Virtually all publicly traded companies have been subject to these “compensation actually paid” rules this year.
The new approach is supposed to help shareholders determine whether an executive’s compensation is aligned with their company’s stock market return. It emphasizes the annual changes in the value of an executive’s current and potential stock holdings, in contrast with the traditional approach, which provides a snapshot of the estimated value of a pay package when it is granted.
It’s too early to judge the new calculation. Though it provides new tidbits, it has drawbacks. For one thing, the way it’s computed is complex. In their disclosure statements, companies have quietly complained about it.
After Mr. Musk, the next C.E.O. on what I’ll call the New Accounting list is Alexander Karp, the chief executive of Palantir Technologies, with nearly $1.1 billion. But take that gaudy number with many grains of salt.
A footnote in the Palantir compensation disclosure made me laugh, which was noteworthy because these compensation disclosures usually make me frown.
Referring to Mr. Karp’s apparently gargantuan payday, it said: “The term ‘compensation actually paid’ or ‘CAP’ does not reflect the amount of compensation actually paid, earned or received by him during the applicable year.”
In reality, Palantir said, the numbers reported for Mr. Karp and a handful of other Palantir executives “are driven primarily by changes in our stock price,” which rose more than 100 percent in 2023, producing big gains for shareholders and so, “following S.E.C. disclosure rules, the fiscal year 2023 CAP disclosed below has increased.” But the previous year, 2022, was a miserable one for the whole stock market. Palantir shares fell sharply, as did the value of Mr. Karp’s compensation, using the New Accounting approach. For 2022, the company said, he lost more than $1.7 billion.
These staggering, fluctuating sums would be perplexing in isolation. Still, they serve a purpose, I think. Big changes in this measure are a sign that a C.E.O. received enormous compensation packages involving company stock in the past. For example, The Times reported that for 2020, Mr. Karp received $1.1 billion in Traditional Pay, the most for any chief executive that year.
Similarly, Broadcom reported that in 2023, Mr. Tan’s compensation with the New Accounting was $767,654,487, almost five times his already rich compensation on the Traditional Pay list. That happened because the share price rose and Mr. Tan, the chief executive of his company since 2006, had amassed a great deal of stock, options and the like.
In an interview, Roy Saliba, the managing director at ISS-Corporate, a provider of data and analytics to corporations, said, “The compensation actually paid numbers really get amplified for executives who have been at a firm for a long time and have accumulated holdings for several years.”
Here are the leaders in the New Accounting list:
Who Earned the Most Last Year
Top 10 U.S. chief executives by “compensation actually paid” in 2023, an accounting measure that includes changes in the value of current and potential stock holdings.
For investors untroubled by income inequality and its social consequences, it might be fine for C.E.O.s to make expanding fortunes as long as stock prices rise. And prices have risen for the overall market since 2010.
The median pay for chief executives of S&P 500 companies rose 63 percent from 2010 through 2023, based on data provided by ISS-Corporate. At the same time, the S&P 500 returned 462 percent, including dividends, according to FactSet.
If you focus entirely on stock performances like that, the level of C.E.O. pay may seem inconsequential. Say-on-pay votes give shareholders a chance to signal disapproval of pay packages, but 92 percent of the time this year, investors at S&P 500 companies have said “yes” on C.E.O. pay, according to ISS-Corporate data.
Yet I suspect that the stock market would perform well even if C.E.O.s merely earned millions, instead of hundreds of millions, and rank-and-file workers got a bigger slice of the pie. That’s not the way the world has been going, not for many years. But it doesn’t have to be that way.