Which CEO Exceeds Apple’s Tim Cook to Lead the US Compensation Rankings?

Rick Smith, CEO of Axon Enterprises, a public safety technology firm, was the highest-paid CEO in the United States last year, receiving a compensation package of $164.5 million, above that of Apple's Tim Cook and Netflix's Theodore A. Sarandos.

Rick Smith. Image: GETTY IMAGES

Axon, the manufacturer of Taser stun guns and body cameras, experienced a revenue increase above 30% for three consecutive years and reported a record annual net income of $377 million in 2024. Axon's shares increased over twofold last year, following a rise over 50% in 2023.

The majority of Smith's compensation comprises stock awards, contingent upon the company achieving milestones related to its stock price and operations from 2024 to 2030. According to a recent poll by The Associated Press, companies must give a value to stock awards upon their granting.

Additional high earners in the poll comprise Lawrence Culp, CEO of GE Aerospace ($87.4 million), Tim Cook at Apple ($74.6 million), David Gitlin at Carrier Global ($65.6 million), and Ted Sarandos at Netflix ($61.9 million). The majority of such compensation packages comprised stock or options awards.

The median stock award increased over 15% last year, in contrast to a 4% rise in base salary, as reported by Equilar.

Melissa Burek, a partner at Compensation Advisory Partners, stated, "For CEOs, long-term incentives consistently increase more each year than salaries or bonuses." "Considering the substantial influence of long-term incentives on executive compensation, this trend is logical."

Jackie Cook from Morningstar Sustainalytics stated that linking CEO compensation to performance is advantageous since share-based remuneration seems to convey a distinct market signal that the majority of shareholders value. She observes that the increased utilization of share-based compensation has resulted in a "remarkable surge" in CEO remuneration "correlating with recent market performance," which has "exacerbated the pay disparity within organizations."

Several prominent wealthy CEOs rank low on the AP study. Warren Buffett's remuneration was assessed at $405,000, or five times the salary of an employee at Berkshire Hathaway. Tesla's proxy indicates that Elon Musk earned no remuneration for 2024; nevertheless, in 2018, he was granted a multiyear package estimated at $56 billion, which is currently the focus of a legal dispute.

Other prominent CEOs did not satisfy the criteria for participation in the study. Brian Niccol of Starbucks received a compensation package estimated at $95.8 million, despite assuming the role of CEO only on September 9. Jensen Huang of Nvidia experienced an increase in his remuneration to $49.9 million; nonetheless, the business submitted its proxy after to April 30.

The standard remuneration package for chief executives of S&P 500 businesses increased by about 10% in 2024, driven by a robust stock market and a significant rise in corporate profits.

Numerous corporations have responded to shareholder demands to align CEO compensation more closely with performance metrics. A significant percentage of compensation packages comprises stock awards, which the CEO frequently cannot liquidate for years, if ever, until the company achieves specific objectives, generally a heightened stock price, market value, or enhanced operating profitability.

The Associated Press' CEO salary poll, utilizing data reviewed by Equilar, encompassed remuneration information for 344 leaders at S&P 500 firms who have completed a minimum of two consecutive fiscal years with their businesses, who submitted proxy statements between January 1 and April 30.

An excellent year at the pinnacle

Image: AXON - Board of Directors

The median compensation for CEOs increased to $17.1 million, reflecting a 9.7% rise. Simultaneously, the median salary of employees at the surveyed organizations was $85,419, indicating a 1.7% annual increase.

CEOs had to manage persistent inflation and elevated interest rates last year, alongside diminishing consumer confidence. However, the economy also had many advantages: Consumers continued to spend despite their reservations over the economy; inflation decreased to some extent; the Federal Reserve reduced interest rates; and the labor market remained robust.

The primary benchmark of the stock market, the S&P 500, increased by over 23% last year. Profits for companies within the index increased by over 9%.

“The year 2024 was anticipated to be robust, thus the (almost) 10% increases align with the timing of the compensation decisions,” stated Dan Laddin, a partner at Compensation Advisory Partners.

Sarah Anderson, director of the Global Economy Project at the progressive Institute for Policy Studies, stated that there have been recent "long-overdue" increases in compensation, particularly for individuals at the lower end of the wage spectrum. However, she stated that numerous employees in the wealthiest nations continue to face difficulties in settling their financial obligations.

The wage disparity

At half of the corporations in AP's annual compensation poll, it would require the median employee 192 years to earn the equivalent of what the CEO earns in one year. Since 2018, companies have been mandated to report the so-called pay ratio.

The pay ratio is generally largest in industries characterized by low wages. For example, at Carnival Corp., the CEO's compensation was over 1,300 times greater than the median employee salary of $16,900. The CEO of McDonald's earns approximately 1,000 times the salary of an employee receiving the company's median compensation. Both companies operate in multiple countries.

According to the Labor Department, wages and benefits for private-sector workers in the U.S. increased by 3.6% through 2024. The typical employee in the United States earns $65,460 annually. The amount increases to $92,000 when factoring in benefits such as healthcare and other insurance.

Anderson stated, "Despite the ongoing increase in CEO compensation, we continue to face a significant issue with disproportionate pay disparities." "These substantial disparities are not only inequitable to lower-level employees who significantly contribute to company value, but they also undermine organizational effectiveness by diminishing employee morale and increasing turnover rates."

Progress for female CEOs

The 27 women included in the AP study — the biggest number since 2014 — experienced a median salary increase of 10.7%, reaching $20 million. This contrasts with a 9.7% increase to $16.8 million for their male counterparts.

Judith Marks of Otis Worldwide was the highest-paid female CEO, receiving a compensation package worth $42.1 million. The firm, recognized for its elevators and escalators, has maintained an operational profit above $2 billion for four consecutive years. Approximately $35 million of Marks' pay was constituted by stock grants.

Other leading earners among female CEOs included Jane Fraser of Citigroup ($31.1 million), Lisa Su of Advanced Micro Devices ($31 million), Mary Barra of General Motors ($29.5 million), and Laura Alber of Williams-Sonoma ($27.7 million).

Christy Glass, a sociology professor at Utah State University specializing in equity, inclusion, and leadership, stated that although there may be a slight increase in the number of women on the highest-paid CEO list, overall equality trends are stagnant, especially as corporations reduce their DEI initiatives.

"There are perhaps a few additional names on the list, but we are not substantially altering the situation," she stated.

Emphasizing security

Equilar discovered that an increasing number of corporations are providing security benefits within executive remuneration packages, potentially in response to the December shooting of UnitedHealthCare CEO Brian Thompson.

Equilar reported that an analysis of 208 businesses within the S&P 500, which submitted proxy statements by April 2, indicated that the median expenditure on security increased to $94,276 last year from $69,180 in 2023.

Centene, a provider of health care services for Medicare and Medicaid, and the semiconductor manufacturer Intel were among the companies that enhanced their security benefits.