The Six Components of CEO Compensation
When a company reports that its CEO earned $20 million, that number comes from the Summary Compensation Table in the SEC proxy statement (DEF 14A). It includes six categories, each serving a different purpose in the pay package.
1. Base Salary
The fixed annual cash payment, typically the smallest component. Most S&P 500 CEO salaries range from $1 million to $1.5 million. Some companies set it at exactly $1 as a symbolic gesture (though the CEO collects far more in equity). Base salary accounts for roughly 5-10% of total compensation at large companies.
2. Stock Awards (RSUs and PSUs)
Restricted Stock Units (RSUs) and Performance Share Units (PSUs) are the largest component of most CEO pay packages, often 50-70% of total compensation. RSUs vest over time (typically 3-4 years), while PSUs vest only if specific performance targets are met. This is designed to align CEO incentives with long-term shareholder value.
3. Stock Options
Options give the CEO the right to buy company stock at a fixed price (the strike price) in the future. If the stock rises, the options become valuable. If the stock falls below the strike price, they are worthless. Options were the dominant form of CEO pay in the 1990s and early 2000s but have been largely replaced by RSUs and PSUs at most companies.
4. Non-Equity Incentive (Annual Bonus)
Cash bonuses tied to annual performance metrics like revenue targets, earnings per share, or operational goals. The target bonus is typically 100-200% of base salary, with actual payouts ranging from 0% to 200% of target depending on results.
5. Pension and Deferred Compensation
Changes in pension value and nonqualified deferred compensation earnings. These can swing significantly year-over-year based on interest rates and plan assumptions, sometimes making CEO pay appear to jump or drop dramatically without any actual change in the pay agreement.
6. Other Compensation (Perks)
Personal use of corporate aircraft, security services, financial planning, club memberships, and other benefits. Companies must disclose perks exceeding $10,000 individually or $25,000 in total. Executive perks typically range from $100,000 to $500,000 per year.
Why CEO Pay Is So High
CEO compensation at large public companies has grown dramatically over the past four decades. The Economic Policy Institute estimates that CEO pay has risen over 1,000% since 1978, while typical worker pay has grown only 15% in the same period. The median CEO-to-worker pay ratio across our database is 157:1.
Several factors drive this growth: the shift to equity-based compensation tied to rising stock markets, competitive benchmarking against peer groups, and the increasing scale and complexity of large public companies.
How to Evaluate Whether CEO Pay Is Justified
Raw compensation numbers alone do not tell you whether CEO pay is appropriate. Our Pay-for-Performance Score grades CEO pay alignment across four dimensions: total shareholder return, revenue growth vs. compensation growth, say-on-pay vote approval, and CEO-to-worker pay ratio relative to peers.
Explore the data: see which CEOs have the best and worst pay-for-performance alignment.
Where the Data Comes From
All compensation data on CEOPay comes from SEC proxy statements (DEF 14A filings), which public companies are required to file annually before their shareholder meeting. These filings are available on the SEC EDGAR database. We extract data from XBRL-tagged filings for machine-readable accuracy.