US CEO Salaries Rise 12% This Year... Three Times That of Average Employees

Effect of Reapproval of Musk's Performance and Compensation

The approval of a multi-trillion won performance compensation plan for Elon Musk, CEO of Tesla, has led to a 12% increase in the salaries of CEOs in the United States this year. This rate is three times higher than the overall wage growth rate of American workers.

According to ISS Corporate, a market research firm under ISS, the world's largest proxy advisory firm, the median salary of CEOs of S&P 500 listed companies has increased by 12% compared to the same period last year. This growth rate is three times the average wage increase of 4.1% for American workers.

The recent decision to approve the multi-trillion won compensation plan for CEO Musk has driven up the overall CEO salary growth rate. On the 13th, Tesla shareholders approved the reauthorization of the 2018 compensation plan granting CEO Musk 303 million shares, approximately $56 billion (about 78 trillion won) in stock options. Although this compensation plan was fully paid out in 2022, the court ruled in favor of a minority shareholder’s invalidation lawsuit, putting Musk at risk of having to return it. To secure a favorable ruling in the July appeal, Musk put the reauthorization of the compensation plan to a vote at this week’s shareholders’ meeting.

The reapproval of Musk’s compensation plan has reignited debates over excessive executive pay and the acceleration of social inequality resulting from it.

William George, former Chair of the Performance Committee of Exxon’s Board, criticized the reapproval of Musk’s compensation plan, stating, "There is no limit to salary, sending a message to executives that they can earn as much as they want," and added, "Executive pay has grown uncontrollably, which will cause a divide between the haves and have-nots."

This criticism extends to major institutional investors who mechanically approve CEO compensation plans. For example, BlackRock and Vanguard, major institutional investors in Tesla, approved CEO compensation plans in 96% and 91% of the companies they invested in last year, respectively. However, Vanguard opposed Musk’s 2018 compensation plan at that time.

Former Chair George expressed disappointment with major institutional investors like BlackRock and Vanguard for not raising concerns about excessive executive compensation plans.

Jill Fisch, a professor at the University of Pennsylvania Law School, noted, "Executive pay has a contagion effect," explaining that one large pay package creates another.