In 2023, the CEO of a clothing retailer earned an astonishing 2,100 times more than the average salary of their employees. This wage gap between corporate leaders and ordinary workers is not new but has been deepening each year, especially as the U.S. stock market continues to thrive.
According to an analysis conducted by Equilar and the Associated Press, the median CEO of the S&P 500 earned 196 times more than the median employee salary in 2023. This marks a significant increase from the ratio of 185 in 2022. The pay disparity between CEOs and common workers reflects growing economic inequality and raises questions about fairness and wealth distribution in modern companies.
The wage gap between CEOs and common workers is driven by the exponential growth in CEO compensation, which is intrinsically tied to company stock prices. While CEOs enjoy notable increases in their pay, workers are struggling to keep up with the constantly rising cost of living.
The leap observed in 2023 alone was significant. The average total compensation for S&P 500 CEOs, including stock awards, soared to an impressive $16.3 million, representing a substantial 12.6% increase from the previous year. By comparison, growth in 2022 was just 0.9%.
Meanwhile, workers saw increases in their wages, but at a much slower pace. The average S&P 500 employee earned $81,467 last year, which marked a 5.2% increase compared to 2022, as highlighted in the report. This stark disparity in the rate of wage increases between CEOs and common workers underscores growing economic inequalities and raises concerns about pay equity and fairness within companies.
In simple terms, while workers saw an annual average increase of about $4,300 in their salaries, CEOs enjoyed an extraordinary boost of $1.5 million. This disparity is certainly frustrating for employees, who face rising costs in essential areas such as food, childcare, and auto insurance. While the inflation rate in the United States has decreased, it still remains above normal levels.
Although workers’ paychecks are now growing faster than prices—marking a reversal compared to previous years in 2021 and 2022—the cumulative impact of three years of elevated inflation remains. This reality creates a significant challenge for workers trying to maintain their purchasing power and quality of life in an increasingly challenging economic environment.
Americans are facing a considerable financial burden, with an average monthly spending increase of $1,015 compared to 2021, even though their monthly income has grown by $1,109 during the same period, according to Moody’s Analytics. This increase in costs essentially cancels out the income gains, leaving consumers with little financial relief.
The stock market boom plays a critical role in CEO compensation, as it is directly linked to market performance. While CEOs receive a fixed salary and certain benefits, the bulk of their compensation is typically derived from stock awards.
According to Equilar’s study, stock awards accounted for about 70% of total CEO compensation last year. With the stock market’s rise, the median stock award grew significantly, reaching $9.4 million—a 10.7% increase from the previous year, as highlighted in the report. This close correlation between stock market performance and CEO compensation underscores how the fortunes of these corporate leaders are directly tied to the financial health of the companies they lead.
Last year, the S&P 500 posted an impressive 24% gain, as investors breathed a sigh of relief that the economy did not fall into a recession and eagerly anticipated potential interest rate cuts by the Federal Reserve. The Nasdaq performed even more remarkably, rising 43% last year, driven by the artificial intelligence boom.
Despite persistent inflation, which has so far prevented the Fed from cutting rates this year, the S&P 500 has risen an additional 11% since the beginning of the year, reaching record highs. This suggests that CEO pay packages could reach even higher levels this year.
No CEO in the S&P 500 came close to the total pay of Broadcom’s CEO, Hock Tan, who earned an astounding $161.8 million last year. These figures highlight not only the extraordinary scale of CEO pay but also the growing disconnect between corporate upper echelons and the financial realities faced by many workers.
Hock Tan’s extraordinary pay was driven almost exclusively by stock awards, as Broadcom’s share price nearly doubled last year. This surge resulted in doubled compensation for Broadcom’s CEO in 2023, elevating him to a position where he earned 510 times more than the median salary of the company’s employees.
The second-highest-paid CEO last year was William Lansing of FICO, whose total compensation reached $66.3 million. Following him was Apple’s CEO Tim Cook, who earned $63.2 million last year—equivalent to 672 times the median Apple employee salary of $94,118. These numbers highlight the striking disparity between CEO compensation and base worker wages, a phenomenon that continues to fuel debates about economic inequality and wealth distribution.
The pay disparity reaches even more extreme levels in companies with a workforce composed of hourly and part-time employees.
For instance, Barbara Rentler, CEO of clothing retailer Ross Stores, received total compensation of $18.1 million last year. Meanwhile, the median Ross employee—a part-time retail associate—earned $8,618. This means Rentler earned an astonishing 2,100 times more than her median employee.
This glaring pay disparity vividly illustrates the gap between CEO salaries and the earnings of base-level workers in many companies, fueling growing concerns about economic inequality and pay equity.
