As inflation chews up worker pay, top CEOs got 7.7% raise last year

For nearly two years, worker pay in the U.S. has fallen short of crushing increases in the cost of living. But a handful of the highest-paid CEOs have comfortably stayed ahead of inflation.

Average pay for top chief executives last year rose 7.7%, according to a report from Equilar, an executive compensation research firm. That raise comfortably beat out inflation, which was 6.4% in December. 

The median corporate leader on Equilar's list of 100 best-paid CEOs made a record $22.3 million in 2022, including salaries, stock awards and cash bonuses. The report focused on public companies with more than $1 billion in revenue who had reported executive pay as of March 31. 

"CEO compensation continues to rise at a higher rate than median employees," Equilar said, noting that the typical CEO on the top 100 list makes 288 as much as a typical worker. The growing gap "continues to draw the ire from the average employee," the report noted. "[W]ith CEO compensation continuing its upward climb, the ratio will continue to be scrutinized in the public eye."

The typical full-time worker last year made about $56,000, according to the Bureau of Labor Statistics. 

Less cash, more stock

While CEO' 7.7% pay increase last year topped the rank-and-file, most of whom received 5% raises at best, it's a sharp fall from 2021, when executive leaders' compensation swelled nearly 31%, boosted by post-pandemic bonuses and stock awards. Still, the increase is notable considering how poorly most companies fared in the markets last year. The S&P 500 index lost 18% in 2022, while Equilar's list had a median investment return of -11.1%.

Companies responded to the downturn by pulling back on cash bonuses to executives, which fell nearly 6% last year. But they more than made up for that drop by boosting stock awarded to CEOs, said Amit Batish, Equilar's director of content.

"Stock awards, which are the largest component of CEO pay packages by far,  increased in value by 19.7% to $13.8 million in 2022, the largest increase across all components," he said. Most of these awards, he added, "were granted at the beginning of the year prior when there was less economic uncertainty, so they do not necessarily take into account downturns." 

Guaranteed win

In the 12 years Equilar has been tracking this information, average CEO compensation has never fallen. Its smallest increase in that period, a 1.8% rise in 2019, still beat out inflation that year.

"When companies are doing well, they hand out huge compensation packages to their CEOs, and when they're doing really badly they often hand out even larger compensation packages, arguing it's necessary for retention purposes," said Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, a left-leaning think tank. "We're not seeing a lot of restraint from corporate boards."

Companies often justify paying CEOs in stock by saying it aligns a corporate leader's financial incentives with the company's — ostensibly, the executive earn more if the company does well or hits certain targets. But companies often boost CEO pay even when executives miss their targets, IPS noted in a 2021 report that identified 50 large companies that changed their executive compensation rules during the pandemic.

The highest-paid CEO on Equilar's list was Peloton's Barry McCarthy, whose compensation last year totaled $168 million, most of it in the form of stock options. McCarthy was brought on as CEO in February 2022 after a product recall, supply-chain issues and the fitness gear company's falling stock price led to the exit of former CEO John Foley.

McCarthy is followed on the list by Apple CEO Tim Cook, who took in $99.4 million last year, and AIG's Peter Zaffino at No. 3, with $75.3 million. The full list is available on Equilar's site.