By some measures — depending on how much caviar is in your diet — you might call it a tough week for a couple of America’s most prominent CEOs. The chief executives of Tesla and Intel lost out on massive stock payout packages: Tesla’s Elon Musk would've received $56 billion if a judge hadn't voided the plan, while Intel’s now former CEO Pat Gelsinger could’ve taken home an estimated $140 million if he had turned the company around.
But don’t fret — Musk, Gelsinger and the nation’s top CEOs are still very, very rich. Musk, who runs several other businesses, has an estimated net worth of $353 billion, according to the Bloomberg Billionaires Index, which lists him as the world's richest person. Gelsinger earned at least $46 million during his four years at Intel, according to a Fortune analysis. They’re in gilded company: The average top American CEO took home $22.2 million in 2023, according to data from the Economic Policy Institute. Meanwhile the average American earns roughly $59,228 per year, according to the Bureau of Labor Statistics.
This is a reminder — or, perhaps, an education — of two things. First, those who don't meticulously track CEO compensation may be unaware that for many American chief executives, most of their pay comes in the form of stock payout packages that accompany their base salaries and bonuses. And second, even when they miss out on their packages, they’re still staggeringly wealthy, and their paydays dwarf the cash earnings their average employee will see.
Stocks account for most CEO pay
Payout packages can be mind-boggling for the average person who isn’t a member of their local yacht club. In 2023, stock awards — which can trigger millions of dollars in payouts to a CEO if their company’s stock price reaches a certain value — made up roughly 77% of the average CEO’s compensation, according to the Economic Policy Institute. For CEOs taking home $22.2 million per year, that means roughly $17 million of those earnings would come in the form of stock payout packages. (In 2023, the median value of a CEO’s stock awards package was roughly $9.4 million.)
One theory of why CEOs' compensation structure has shifted toward stock incentives is that it incentives the CEO to make business decisions geared toward raising the stock price, rather than betting on a long-term plan that may not immediately turn a profit.
Corporate decisions to downsize can also increase stock prices. A Bloomberg analysis in 2023 found that, on average, major American tech companies’ stock prices rose 5.6% in the month following layoff announcements. In 2023, after Google’s parent company Alphabet announced it would lay off 12,000 workers, its stock price rose 5%, according to The New York Times. Microsoft laid off 10,000 workers that year, too; its stock price rose roughly 6%.
Those workers, typically, earn a miniscule fraction of what their CEO makes. In 2023, top CEOs earned 290 times as much as their average worker, according to the Economic Policy Institute. That means that at a company in which the average worker makes a $60,000 salary, its CEO would be taking home an average of $17.5 million.
The earnings gap between CEOs and their workers wasn’t always this dramatic. In 1965, the average CEO made 21 times as much as one of their typical workers, per the Economic Policy Institute data. That’s still a steep discrepancy — hypothetically, $60,000 for the worker versus $1.26 million for the CEO.
CEO pay soars above workers’ wage growth
Top executives' earnings serve as a stark illustration of corporate America’s wage inequality, which has become more severe over the last 40 years.
Between 1978 and 2023, top CEO compensation rose 1,805% while the average worker’s compensation rose 24% over that same time period, per the Economic Policy Institute.
To illustrate that difference: a $60,000 salary increasing by 24% would translate to $74,400, while that same salary growing by 1,805% would yield $1.1 million. Now, consider that the CEO’s compensation was likely starting at far above $60,000, and you’ve got a working understanding of just how wide the gulf has become between a company’s top executive and the workers who, in theory, are producing the product or service that earns the company its profits.
The Institute also found that top executives' base salaries, bonuses, stock awards and stock options fell 19.4% from 2022 to 2023 even though the stock market was up. But this doesn't necessarily mean that company boards are pulling back on CEO pay.
'An activist posing as a judge'
On Dec. 1, a Delaware judge reaffirmed her ruling to void Musk’s colossal pay package — “the largest executive compensation award in the history of public markets,” as she described it in her ruling. The 10-year, performance-based plan didn't include a salary but would have given Musk additional Tesla shares the more the company grew, NPR reported.
The pay package was worth $2.6 billion when it was granted by Tesla's board in 2018; by the time Chancellor Kathaleen McCormick initially voided it in January 2024, its value had swelled to $56 billion, per Bloomberg.
McCormick called the pay package “deeply flawed,” observing that the board’s compensation committee “worked alongside [Musk], almost as an advisory body,” rather than negotiating with him. The ruling resulted from a 2019 lawsuit filed by a Tesla stockholder in which he claimed the pay package was approved without requiring Musk to focus solely on Tesla operations. (In addition to running Tesla, Musk also leads the social media platform X — formerly known as Twitter — along with SpaceX, Neuralink, The Boring Company and xAI.)
After her ruling, Musk posted a succinct tweet (Xeet?) on X: “Absolute corruption.” He later called McCormick “an activist posing as a judge" and said he planned to appeal.
Also on Dec. 1, Intel announced the departure of Gelsinger, who took the helm in 2021 with big plans to rescue a company that has struggled in recent years against new chipmakers like Nvidia. Intel’s stock has fallen more than 50% this year, and a source told Fortune that Gelsinger’s efforts “were not showing results quickly enough.”
Gelsinger, who received $38.7 billion in salary, bonus, and vested stock and exercised stock options since his tenure began, is set to receive an additional $7 million to $10 million in severance as it ends, Fortune reported. He missed out on a larger payday in the form of performance-stock because Intel's stock plummeted amid its competitors' success, per Fortune.
