Elon Musk’s record-breaking $56 billion compensation package may have been nullified by a Delaware judge, but its impact on CEO pay is still being felt. As Tesla shareholders prepare to vote on a new deal for Musk on June 13, it is clear that he is not the only CEO pushing the boundaries of executive compensation.
Honestly, Musk’s deal was always going to be a game-changer. The man is a visionary, a trailblazer, and a genius. He is transformed the electric car industry, made space travel cool again, and inspired a generation of entrepreneurs. So, when he inked a deal that could potentially earn him $56 billion, it was always going to raise eyebrows. And raise eyebrows it did.
Median total CEO compensation soared 11.4% in fiscal 2023 to $23.7 million, according to Equilar. That’s on top of a 7.7% increase in 2022. The number of CEOs in the S&P 500 taking home more than $50 million has also jumped in recent years, with Broadcom’s Hock Tan leading the pack at $162 million in 2023.
But what is driving this compensation frenzy? Is it a case of “keeping up with the Musks,” or are there deeper forces at play? James Reda, a compensation expert, says, “It is not like football, where someone gets $25 million and someone making $15 million says, ‘I want that money.'” Companies were less influenced by Musk’s pay deal because its structure was so unusual.
Now, I’m not going to lie – these numbers make me uncomfortable. I mean, I get it, CEOs are important, but $162 million? That’s just obscene. And it is not just the big players who are seeing a surge in CEO pay. Smaller companies are also getting in on the action, with median CEO compensation at Russell 3000 companies with revenue under $50 million increasing 19.3% between 2018 and 2022.
One thing is for sure – investors are going to push back. 3M shareholders recently voted against a $16.4 million compensation package for its former CEO Mike Roman, showing that investors are finally starting to say enough is enough.
So, did Musk’s deal spark a compensation boom? I think it’s clear that it did. And while I admire Musk’s vision and innovative spirit, I think it’s time for a reality check. CEO pay needs to be reined in, and fast.
We need to start valuing the hard work and dedication of all employees, not just the ones at the top. The question is, what’s the new normal? And who will be the next CEO to break the bank?
The Future of CEO Pay
- Musk’s deal was just the beginning: Elon Musk’s record-breaking compensation package may have been nullified, but it sparked a conversation about CEO pay that’s long overdue.
- ESG is the new normal: With companies like Tesla leading the charge on sustainability and social responsibility, CEO pay will increasingly be linked to ESG performance.
- Shareholders are taking control: As seen with the 3M shareholders’ vote against excessive CEO pay, investors are finally flexing their muscles and demanding more reasonable compensation practices
