Elon Musk’s up to $1 trillion pay package highlights how CEO pay continues to rise even as employee pay slumps and shareholder compensation remains mixed, according to multiple studies.
According to Bloomberg, Musk is already the richest person on the planet, with a net worth of more than $660 billion. Musk reinstated his 2018 Tesla pay package, currently valued at more than $130 billion, in December, and his company SpaceX appears to be preparing for a possible initial public offering in 2026. These two events could make Musk the world’s first trillionaire this year. Additionally, his new pay package, worth up to $1 trillion, could begin to be paid out over the next 10 years.
Mr. Musk may be an outlier, but his stock-driven gains highlight the meteoric rise in CEO pay and wealth in recent decades, driven by rising stock markets and the widespread adoption of stock-based pay structures.
According to the Economic Policy Institute, compensation for top CEOs has increased by 1,094% over the past 50 years. This compares to a 26% increase in general workers’ compensation.
Median total compensation for S&P 500 CEOs will be $17.1 million in 2024, up nearly 10% from 2023, according to company analysis firm Equilar. CEOs currently earn 192 times more than the average employee, with a ratio of 186 to 1 in 2023.
Tesla CEO Elon Musk attends the Saudi-US Investment Forum in Riyadh, Saudi Arabia, on May 13, 2025.
Hamad Mohammed | Reuters
Driving the acceleration in CEO pay are changes in the types of equity compensation used to incentivize and reward corporate leaders.
CEO compensation typically includes four categories: salary, long-term incentives, short-term incentives, and perks. Long-term and short-term incentives, primarily stock-based compensation, make up the bulk of CEO compensation. Stock compensation will account for 72% of CEO compensation in 2024, with a median increase of 15% in the same year, according to Equilar.
For example, Musk’s multi-trillion dollar salary package does not include a salary. The $1 trillion in potential value would come from stock-based compensation tied to a variety of goals. For Musk to receive the full payment, Tesla will need to hit certain key milestones, such as market capitalization and business performance. Even if Tesla doesn’t meet all its goals, he could make billions of dollars from the stock.
“Having milestone achievements built into CEO pay packages could become the norm in the future,” said Amit Batish, senior director of marketing at Equilar.
Company boards of directors and CEOs themselves say that because their pay is closely tied to stock prices, their compensation reflects the greater wealth created for shareholders. They argue that CEOs perform well only if shareholders perform well. If stock prices plummet, the CEO’s pay could fall significantly.
Others argue that CEOs have only a partial influence on their companies’ stock prices. MSCI’s 2021 study of top executive compensation from 2006 to 2020 found a weak correlation between increases in CEO compensation and company performance.
“We can all see that the idea that the guy in the corner office is somehow almost single-handedly responsible for the value of the company, and that everyone else is a little pawn contributing nothing, is not true,” said Sarah Anderson of the Institute for Policy Studies.
Tesla’s Optimus robot walks during the launch event held in Los Angeles, California, USA on October 10, 2024. A still image taken from a video.
Tesla | via Reuters
According to a 2021 MSCI study, average-performing CEOs earned just 4% less in realized compensation than the best-performing CEOs. More importantly, the least compensated CEOs produced the most returns for shareholders.
According to investment research firm MSCI, “When we measured compensation and performance according to CEO tenure, we found little evidence that high CEO compensation achieved this lofty goal of CEO incentives.”
Since the 1990s, corporate boards have moved from stock options that incentivize short-term performance to stock-based compensation that boards claim is driven by long-term incentives. Shareholders of publicly traded companies can now vote on CEO pay advisory powers, known as “say-on-pay” voting, but boards have the final say on compensation packages.
While reining in CEO compensation has proven ineffective, given the natural “trenchment” of median CEO pay by board compensation committees, some economists have advocated increasing employee stock compensation to close the gap between employees and CEOs.
For example, an employee stock ownership plan (ESOP) is a qualified retirement plan that gives employees stock in a company through a trust. Lauren Rogers, executive director of the National Center for Employee Ownership, said employees who are able to participate in ESOPs tend to end up with more financial security. That, in turn, benefits companies, he says.
“Employee-owned businesses are more productive,” Rogers said. “They can hire more people. People are less likely to leave. They’re more competitive.”
To learn more about the rise in CEO pay and what’s driving these huge paychecks, watch the video above.
