How much do chief executives earn in America? It depends on who you ask.
For all the recent headlines—and there have been plenty of headlines recently—about the soaring compensation of America’s CEOs, most stories in the mainstream press fail to focus on this inconvenient truth: When it comes to CEOs in America, the vast majority run private companies, and almost none of them are paid anything like the jaw-dropping numbers raked in by those at the top of the corporate pyramid.
So, how much do most CEOs actually earn? The answer won’t make for scintillating headlines, sorry. Preliminary data from Chief Executive’s annual research on the compensation plans of 1,300 U.S. private companies—the largest such survey of its kind the nation—finds the median private company CEO earned a total cash compensation of $370,000 in 2021. A tidy sum to be sure, but hardly Musk money.
Even for CEOs within the 75th percentile of pay, the numbers don’t come anywhere near the massive compensation plans of the top-paid CEOs. Actual total cash comp for those in the top-quartile of CEOs was less than $650,000 in 2021. For those keeping score, that’s about 12 times the median annual earnings of workers in the U.S.—a far cry from the 339-times figure (based on the largest public companies) that made ripples after it was reported in The New York Times.
Preliminary data for 2022 doesn’t show much will be changing either: The majority of companies are reporting minimal (<5 percent) change to the median CEO compensation this year, vs. prior year. This comes as no surprise for anyone familiar with senior executive compensation at private U.S. companies. The median YoY change in cash compensation is historically flat—while the top quartile changes in base salaries and bonuses are an average of 2.25 and 4.50 percent per year, respectively, when looking back at the past five years.
The Equity Stake
Much of the data reported about large public company CEOs emphasizes the equity portion of their comp plan. Our data shows unlike their public company counterparts, the median private company CEO does not typically receive new equity grants each year.
While it may be obvious why CEOs did not receive new grants in 2020—many, in fact, took cuts to their compensation that year to help weather the Covid storm—a look back at 2018, during a robust economy, median private company CEOs did not, then, report any new grants either.
Nevertheless, Chief Executive’s 2021-22 report shows that the median CEO does own approximately 10 percent of their company’s equity, for a value of $1.4 million. While that’s a sizable interest, the challenge for private companies is determining the appreciation of this equity stake. Unlike public companies, most private companies do not value themselves annually.
And even when the data is available, it is highly correlated to various factors, particularly company size. For instance, the median increase in equity value in 2020 for CEOs of companies with $5 to $9.9 million was less than $40,000. At the other end of the scale, the median CEO at companies with $1 billion + in revenues reported a $735,000 increase in their equity value in 2020.
There are many other variables that influence CEO compensation, and equity specifically. Ownership type and sector, among others, play significant roles. In 2020, for instance, we observed large equity appreciations in sectors like technology and pharma, whereas most other industries like retail and restaurants had no (or negative) appreciations.
For more information, go to: ChiefExecutive.net/CompensationReport.