Business & Economy 0

17.06.2024.

9:40

"CEO salaries are out of control"

Salaries for US executives increased at the fastest rate in 14 years, according to data that critics say illustrates how rising pay packages for those like Elon Musk risk exacerbating social inequality.

Izvor: Investitor.me

"CEO salaries are out of control"
shutterstock, Svetlana Lukienko

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So far, median CEO pay at companies in the S&P 500 has risen 12 percent, according to ISS Corporate. The annual increase in general wages in the US was much lower, 4.1 percent, according to official data, as reported by Investor.me.

Musk secured a landslide victory in a shareholder vote last week on his $56 billion stock option package - the largest in US history.

Musk's victory -- a vote confirming a pay package first defined in 2018 -- sends a message to executives that "the sky's the limit here ... you can make as much as you want," said William George, former compensation committee chairman on Exxon's board and former CEO Medtronic.

"CEO pay is out of control. This will cause a further divide in our country between the haves and the have-nots. It worries me a lot because I think there will be a loss of confidence in companies," said George.

Robin Ferracone, Chief executive of Farient Advisors, a salary consultancy, said rising executive bonuses were largely driven by "companies wanting to prevent their CEOs from taking phone calls from rival firms".

"Musk's pay package is unusual for a CEO because it includes stock options tied to ambitious targets, including market capitalization and revenue. Few other executives would risk their entire salary on so-called 'moonshot' awards," she said.

George said he was "disappointed" with big investors, such as BlackRock and Vanguard, who were "not standing up" to excessive CEO pay.

BlackRock and Vanguard, Tesla's biggest institutional investors and the world's largest asset managers, voted on Thursday to approve Musk's $56 billion pay package. The duo has largely approved executive bonuses for years. According to Diligent, in 2023 Vanguard supported 96 percent of pay votes across all companies. BlackRock supported 91 percent of these paid votes.

Both BlackRock and Vanguard typically support at least 90 percent of pay packages at U.S. companies each year, according to Diligent data. According to law firm Sullivan & Cromwell, only 1 percent of S&P 500 votes failed this year.

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