Executive Compensation: A Guide to CEO Salary

Chief executive officers (CEOs) plan and direct all aspects of an organization’s policies, objectives, and initiatives. They get paid a lot for being the top employees in the company. Like athletes and actors, CEOs provide a level of talent that is required to produce the desired product—in this case, a strongly performing company.

The skills and responsibilities that come with the job of CEO are extreme and the number of people who can fill these roles is limited. That is why the market has determined that people with these skills are worth a lot of money to their companies.

While people debate the size of CEO compensation and the gap between executives and employees, compensation is still key to attracting and keeping top leaders. This guide explores CEO salary, including average salaries, pay structures, and the philosophies companies use to determine executive pay.

What is the average CEO salary?

In 2024 , the typical CEO total compensation at S&P 500 companies reached an average of $18.9 million. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) reported that the average CEO-to-worker pay ratio in these companies was 285-to-1. This means that if the median employee earned $66,000, the CEO would have earned about $18.8 million in comparison.

Only about 20 percent of a CEO’s pay is base salary; the rest is made up of incentives based on the company’s performance. The rationale is that if the company is performing well and the shareholders are making money, then the CEO should share in that success.

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CEO Salary Structure

As a general rule, base salary accounts for just 20 percent of a CEO’s pay. The other 80 percent comes from performance-based pay. But the mix can vary by industry. At most companies, most of a CEO’s pay comes from stock or stock option gains. At investment banks, most of it comes from annual bonuses.

Here are the key components of a typical CEO’s total compensation package:

1. Base pay: Fixed pay for the core role and responsibilities of the day-to-day running of the organization. This amount is very often less than $1 million because the IRS has imposed tax restrictions on “excessive” compensation.

2. Annual bonuses: Cash incentives for meeting annual performance objectives.

3. Long-term incentive payments: Awards tied to meeting performance objectives to be achieved for a two- to five-year period. These awards are sometimes described as performance shares, performance units, or long-term cash incentives.

4. Restricted stock awards: An incentive to assure the executives are strongly aligned with the interests of shareholders. Because restricted stock awards have an actual cash value when they are granted, the proxy table shows these in dollars, not in shares.

5. Stock options and stock appreciation rights (SARs): Equity-based compensation for increasing share price and increasing the shareholders’ returns. Options have very favorable accounting treatment for the company, which is why they are so common. Option grants are always shown as a number of shares underlying the option. In a subsequent table in the proxy is an estimation of the present value of each option grant assuming a 5 percent and a 10 percent increase per year in the stock price, or using a mathematical model (e.g., Black-Scholes) to predict the value of the option.

6. Supplemental executive retirement plans (SERPs): Additional retirement benefits which may keep the executive whole or better from a tax regulation that prevents the executive from receiving a pension benefit that exceeds ERISA limits ($135,000 per year or less based on the pension plan). For a CEO making $2 million a year, a $135,000 benefit may be inadequate for maintaining a comparable lifestyle.

7. Executive insurance plans: Retirement income that provides a source of retirement income and a richer death benefit to the executive’s family. These plans are used to guarantee retirement benefits from bankruptcy. Unlike standard retirement plans that receive protection from bankruptcy by the federal government, SERP benefits can be lost in the event of bankruptcy.

8. Miscellaneous executive perquisites and other compensation: Extras for various programs or negotiated deals that don’t properly fit into the above categories, including perks such as country club dues and financial planning. These are often small numbers that disclose imputed income amounts for those additional special benefits, but can also include some very large amounts for items such as loan forgiveness, special insurance programs, relocation expenses, etc.

However, CEO compensation differs in nonprofit organizations. Pay is typically weighted heavily toward base salary or cash compensation. In response to competitive concerns, bonuses are becoming more prevalent as are special tax deferral programs that help executives save for retirement. Unlike comparable programs in for-profits, very few of these programs are broad-based, with participation is limited to a select few.

Every organization’s CEO salary structure is unique, so aligning compensation with business goals and market standards is important. Salary.com’s executive compensation benchmarking tool helps support your CEO compensation decisions with data on salaries, bonuses, equity, incentives, benefits, and change-in-control provisions for over 50,000 top executives.

The Philosophy Behind CEO Salary

Companies often tie CEO compensation to their overall pay philosophy and long-term performance strategy. This philosophy is outlined in the Compensation Committee Report, which explains how pay is determined and why the structure supports both shareholders and the organization.

Key elements of this philosophy include:

• How well CEO salary compares relative to peers: Companies benchmark CEO compensation against similar firms to stay competitive.

• Who the company identifies as peers: The peer group selected influences the level of CEO salary reported.

• How the company’s stock has performed relative to peers and the stock market as a whole: Strong stock performance often leads to higher incentive payouts tied to CEO salary.

• How the company prefers to reward executives through its total pay practices: The pay mix shows what proportion of CEO salary comes from base pay, bonuses, stock options, and long-term cash plans.

• How the company measures its performance: Metrics such as net income (NI), earnings per share (EPS), return on equity (ROE), return on assets (ROA), and revenue growth are directly linked to incentive-based CEO salary.

• What criteria are used for determining the size of bonus payments: CEO salary outcomes may depend on corporate results, divisional success, individual goals, or discretionary decisions.

FAQs

Here are some common questions about CEO salary:

Who are the top 10 highest-paid Chief Executive Officers in the world?

The top 10 highest-paid CEOs in the world, according to the AFL-CIO, are as follows:

Rank	Company	CEO	Year	CEO Compensation
1	QXO, Inc.	Brad Jacobs	2024	$189,367,735
2	Veeva Systems Inc	Peter Gassner	2025	$172,436,133
3	Axon Enterprise Inc	Patrick Smith	2024	$164,525,721
4	Snowflake Inc.	Sridhar Ramaswamy	2025	$101,325,374
5	Starbucks Corp	Brian Niccol	2024	$95,801,676
6	General Electric Co	Lawrence Culp	2024	$88,954,586
7	Tevogen Bio Holdings Inc.	Ryan Saadi	2024	$87,764,783
8	Ares Management Corp	Michael Arougheti	2024	$85,381,842
9	Playtika Holding Corp.	Robert Antokol	2024	$84,141,574
10	Blackstone Inc	Stephen Schwarzman	2024	$84,027,074

What is the difference between a CEO and an owner?

The difference between a CEO and an owner is that a CEO manages the company’s strategy, operations, and decision-making, while an owner holds the financial stake, assumes the risks, and benefits from the profits of the business.

In smaller companies, the owner may also serve as the CEO and oversee daily operations. In larger corporations, however, a CEO is typically appointed to manage strategy and operations, while the owner takes a less active role but continues to hold ultimate ownership rights and financial responsibility.

What is the average CEO salary in California?

According to Salary.com, the average CEO salary in California is $894,569 per year, or about $430 per hour. As of September 16, 2025, salaries typically range from $788,316 at the 25th percentile to $1,019,875 at the 75th percentile.

How does deferred compensation work for CEOs?

Deferred compensation is a portion of a CEO’s salary or bonus that is set aside to be paid later, usually upon retirement or after meeting specific performance goals. This can align the CEO’s interests with long-term company performance and encourage retention.

What are the issues surrounding CEO compensation?

The major issue surrounding CEO compensation is the growing gap between executive compensation and the earnings of average employees. For example, the AFL-CIO reports that the median CEO pay ratio at many large U.S. companies is 285-to-1, meaning that if a median employee earns $66,000, the CEO would earn about $18.8 million.

One effective way to manage executive compensation is to use Salary.com's Dilution Analysis, which examines peer company pay, benefits, and performance-based plans to support balanced, informed decisions.