Elon Musk pushing boundaries of CEO compensation packages

Tesla CEO Elon Musk (TSLA) is once again pushing for a pay package worth $56 billion, which originally was struck down by the Delaware Chancery Court earlier this year. Many CEOs are following in Musk's footsteps as, according to the Wall Street Journal, the number of S&P 500 CEOs to receive compensation above $50 million has risen to 36 in a period from 2019 to 2023.

Yahoo Finance Legal Reporter Alexis Keenan joins Catalysts to break down the advent of CEOs pushing the limits of compensation pay packages.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Nicholas Jacobino

Video transcript

On June 13th, Tesla shareholders will have another chance to vote on Ceo Elon Musk's pay package.

It's been worth as much as $56 billion.

That compensation was invalidated by Delaware Judge earlier this year but Musk, not the only company leader pushing compensation packages higher.

Yahoo finances.

Alexis Keenan has the details.

Yes, a lot of talk about whether the skyrocketing CEO compensation, executive compensation is due to Musk is must to blame.

Is there some Musk effect because he did n before the Delaware court invalidated it that $56 billion compensation package.

Now we wanted to find out how big these pay jumps are and also what's driving them.

So we looked at these compensation packages for CEO S both before the must deal and after the must deal.

And what we found is what really matters is about the size of these increases is the index.

What what we're talking about, which CEO S are we talking about?

And also the size of the companies that they're running.

So take a look at the number of the CEO S in the S and P who were awarded more than $50 million in annual compensation that had a four fold increase.

If you look at the five year period, that's 2013 to 2017 before Musk's 2018 pay package jumping all the way to 36 in the five years after.

So certainly those big awards, the S and P level are significantly quadrupling.

Then let's go to just the biggest US companies.

And what we're talking about here are companies that have more than 1 billion in annual revenue.

The median dollar amount awarded there also saw a jump.

You look at 2022 $22.3 million average paid there.

That was up 7.7% over 2021.

Then if you jump to 2023 you see their up 11 point 4% year over year.

Now if we take though a much wider look and we take a look at the amount the dollar amounts awarded to CEO S in the Russell 3000, right?

So a bigger picture here if we look at 2018 to 2022.

So all after the must deal, you see they all CEO is up 6.2%.

And then you see though a much more moderate increase when you take it to the CEO S that are run companies that have revenues above 20 billion a year, that's just 2.4 increase over that time period.

Now the whopping number there, 19.3% increase from 2018 to 2022.

Those are for the CEO S at the smaller firms under $50 million per year in revenue.

So the lesson here is really that maybe it's not a must effect, maybe that is just an outlier and it's really these companies that are under that $50 million per year in revenue mark that are driving these big jumps.

Uh So a lot to still watch here as pay either increases, moderates decreases.

Uh But what experts are telling me who put together and, and, and analyze these pay packages is that they expect to see a jump for uh the full year 2023 and as we go into 2024 as well, great reporting there, Alexis.

Thanks so much for putting that all in perspective for us.