Chief executive compensation at S&P 500 companies reached an all-time high in 2025, propelled by the growing adoption of performance-based pay structures modeled on Elon Musk's Tesla package, according to the AFL-CIO's annual Paywatch report.
The average pay for S&P 500 CEOs rose 21% to $22.8 million last year, excluding Musk's compensation, marking the highest level since the labor federation began tracking the data in the 1990s. Including Musk's latest Tesla award, the average surged to $340.1 million.
Musk's influence on boardrooms
The AFL-CIO attributes the sharp increase to a wave of mega-pay packages inspired by Musk's compensation structure. Tesla shareholders approved a restricted stock plan valued at $158 billion in November, and Musk could receive up to $1 trillion if all long-term performance targets are met. His SpaceX stake also helped him become the world's first trillionaire.
Labor officials say Musk's pay has become a benchmark for corporate boards. "Musk's pay changes the dynamic when other CEO compensation plans come up, boards use it as a reference," said Fred Redmond, AFL-CIO Secretary-Treasurer, in an interview with Reuters.
Proponents argue such packages align executive rewards with shareholder value creation and encourage long-term performance. Institutional investors have largely continued to back these plans, with average support for "say on pay" resolutions at 90.6% through late June, up from 89.4% in 2025, according to Semler Brossy.
Pay gap widens
The report also highlights a widening gap between executive and worker pay. Excluding Musk's package, the average CEO-to-worker pay ratio rose to 312:1 from 285:1 in 2024. Including Musk, the ratio jumped to 5,387:1.
Redmond noted worker frustration as wage growth lags behind the cost of living, with AI and labor policies adding uncertainty. "As we talk to our members, they're pissed off over what's happening to them, and they feel as though they should be more vocal in terms of calling attention to inequality," he said. Union representation has reached its highest level in 16 years.
The debate over executive pay is increasingly tied to broader concerns about affordability, housing, and healthcare. Labor Department data shows mean annual wages for all US workers rose 3% to $69,770 as of May 2025.
Special awards draw scrutiny
While shareholders generally approve annual pay plans, they are more skeptical of large one-time retention awards. Semler Brossy calls these "a hot-button issue," as they often fall outside regular compensation programs.
Goldman Sachs awarded CEO David Solomon $118.9 million last year, including a substantial retention award, which received 71% shareholder support—below the average. A Goldman spokesperson said, "We're very pleased with the strong supermajority this vote received."
Welltower granted CEO Shankh Mitra a package worth $821 million, intended to cover most of his pay over the next decade, but only 19% of votes supported it. A company spokesperson said the board remains committed to engaging with shareholders, and Mitra will receive the full amount only if all performance targets are met.
The findings come as S&P 500 sets record close amid cooling inflation, and US stocks hover near records even as labor market cracks appear. The trend suggests executive pay will continue climbing as debates over income inequality and corporate governance intensify.
This article is for informational purposes only and does not constitute financial advice.
