Last updated on July 25th, 2024 at 10:52 am
Ever wondered how some CEOs make millions while the rest of us make ends meet? Take Julie Sweet, CEO of Accenture, who makes more in a month than most people make in a year. Is it just dumb luck, or is there more to it?
This post digs into CEO salary, the factors that contribute to their big paychecks and what they do to deserve such big bucks. For instance, did you know that the Airasia CEO salary provided enough for Tony Fernandes to have a total net worth of $335 million by the end of 2020?
Sit back and get ready to separate myth from reality. Is a CEO’s job worth millions a month? Keep reading to find out!
What actually contributes to the big CEO salaries?
The CEO salary is debatable, given the many responsibilities associated with the role.
Julia Sweet is a C-suite executive at the tech giant Accenture, where she helps businesses with strategy, consulting, digital transformation, and more. She has been in the spotlight for her leadership, but it’s not just her impressive CEO career path that gets attention.
In 2023, her CEO salary was a whopping $34 million. But the question is, what is the salary figure, just the base salary, or are there other components?
CEO salary isn’t a single number. It’s a package deal that includes:
- Salary: The base pay is high but usually not the biggest chunk. For example, Tim Cook, CEO of Apple, got a base salary of $3 million in 2023, but his total CEO salary package was a whopping $63.2 million.
- Bonuses: Tied to company performance, bonuses can be big motivators. The bonuses can vary greatly depending on hitting specific targets, contributing significantly to the company’s ROI. The total compensation a CEO earns is heavily influenced by bonuses and can run in hundreds of millions per year.
- Stock options: CEO salary often depends on their investment in their company, too. CEOs often get to buy company stock at a discounted price and can reap huge rewards if the stock price goes up.
Factors Affecting a CEO’s Paycheck: Company, Performance, Industry and More
When it comes to CEO salary, what you earn goes beyond your job title. Here are some key factors that affect the CEO salary:
- Company size: Bigger companies have more resources to offer competitive salaries and benefits packages. Think about it —a tech startup can’t compete with a tech giant on salary alone.
- Performance: The CEO salary is a big deal. Companies reward top performers with raises, bonuses, and promotions, which can add up to a big chunk of your total pay.
- Industry: Some industries just offer more CEO salary. For example, someone in finance or tech might get a higher base salary than someone in education or social work for the same level of experience. This is because of the supply and demand for skilled workers in each industry.
Beyond these two, there’s a whole other world of factors:
- Cost of living: A company in a high-cost-of-living city like San Francisco will pay more to compensate for housing and other expenses. For example, in the case of AirAsia CEO salary, it is significantly higher given the operational base of the CEO is Kuala Lumpur, an expensive city.
- Education and experience: The more academic and professional experiences a candidate can show on a resume, the better the CEO career path will be. The more you bring to the table, the more you’ll earn.
- Labor market: If there’s a high demand for your skills and a low supply of qualified workers, you’ve got leverage to negotiate a good salary.
Who do CEO decisions affect mainly?
Among CEO training courses, IIM Raipur's Executive Certificate Program helps CEOs tackle tough challenges and make smart decisions to grow their businesses in the long run. After all, CEO decisions have a ripple effect and impact various stakeholders within the company’s ecosystem.
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For Employees
Let’s take employees, for example. A CEO salary depends upon the decision to enter a new market or expand product lines, which can be a big opportunity for employee growth. On the other hand, decisions like restructuring or downsizing can lead to job insecurity and a demoralised workforce.
Julia Sweet is known for putting employee well-being first. Her CEO career path focusing on creating a positive work environment and gender equality is an example of how strong leadership can empower employees.
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Shareholders
Shareholders, the lifeblood of any public company, are all about financial performance. Any company, including the Google CEO salary depends on the efficacy of decisions made. These decisions cover everything from product development to risk management, impacting profits, stock price, and, ultimately shareholder returns. Julia Sweet gets this.
At Accenture, her focus on long-term sustainability means the company’s growth path benefits shareholders for years to come. However, prioritising short-term gains over long-term vision can be disastrous. Finding the balance is key.
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CX
Finally, a CEO’s decisions can impact the customer experience. Product quality, innovation, and pricing strategy all play a big role in customer satisfaction and brand loyalty. Being a strong advocate for ethical business practices prioritises responsible sourcing and environmentally friendly practices.
High Pay: Contribution V. Income Inequality
CEO salary is a trending topic at all times. Some argue that exceptional CEOs like Julia Sweet of Accenture are strategic geniuses who grow the company, attract top talent, and create significant shareholder value.
They say their skills are worth a premium salary, just like top athletes. Performance-based pay structures would mean that CEOs make decisions that benefit the company in the long term, aligning their interests with shareholders.
However, critics say the gap between CEO salary and average worker pay is just not sustainable. In 1990, CEOs made 40-50 times the average worker’s pay; today, CEOs make 196 times what their median employee earns.
The widening income gap means social immobility and economic injustice, even for Google employees. The emphasis on stock options means short-term gains over long-term thinking, leading to decisions that boost stock prices at the expense of employee well-being or sustainable business practices.
High Earners and Low Earners: The CEO Pay Spectrum
Julia Sweet’s case is an example of the high-end. CEO salaries vary greatly depending on the industry, company size, and performance. Some industries consistently pay the CEO salary equivalent to the highest wage. Here are a few:
- Technology: Tech companies like Apple, Alphabet (Google), and Microsoft are known for massive CEO packages. The Google CEO salary stood at $226 million in 2022. The industry's fast pace and high growth and the impact a CEO can have on a company’s success drive these big salaries. The estimates run to tens and hundreds of millions annually, heavily influenced by stock options.
- Pharmaceuticals: Pharmaceuticals is another high-paying industry for CEOs. The highest-paid pharma CEO in 2023 was Joaquin Duato of Johnson & Johnson, with a total compensation package of $28.42 million, after a pay leap of 116% from the previous year.
- Financial services: Wall Street giants like investment banks and hedge funds are known for their big CEO salary packages. CEOs in this industry can make millions, with bonuses and stock options adding to their total pay.
The Bottom Line
CEO salary is a complex issue with debatable points on both sides. While Julia Sweet’s stint at Accenture shows what CEOs can do for a company, the massive gap between high and low CEO salaries implies toeing the line of fairness and income equality.
Ultimately, it’s a matter of perspective whether a CEO salary is justified. However, one thing is for sure: the role of a CEO is demanding and requires a special skill set. If you want to lead a company to new heights, consider developing the necessary capabilities with an Executive Certificate Programme for Strategic Chief Executive Officers.
This programme will equip you with strategic thinking, leadership skills, and financial acumen to succeed as a CEO. So, what do you think?
Frequently Asked Questions
- Do CEOs deserve their pay?
CEO salary can be controversial, with some arguing their leadership drives company success, justifying high salaries. However, critics point out that large pay gaps between CEOs and workers affect social mobility and employee well-being.
- How do CEOs get so much money?
CEO salary is influenced by company size, industry, and performance. Many CEOs get bonuses and stock options on top of their base salary, which adds to their total compensation.
- What is the Google CEO salary?
Google CEO salary can vary depending on bonuses and stock options, but it’s always among the highest in the market. Sundar Pichai, the CEO of Google-owning Alphabet, reportedly received $226 million in 2022.
- Which CEO makes the most per year?
It’s hard to say who the highest-paid CEO is globally, as total compensation can vary. However, big and successful tech and finance company CEOs are usually at the top. Currently, Sundar Pichai of Alphabet, Tim Cook of Apple, and Barry McCarthy of Deluxe Corporation are the top-most paid in the CEO salary list.
