Employee ownership advocates say widening pay gaps between executives and workers are not inevitable. Some economists argue that broader use of stock ownership plans could help narrow disparities while improving company performance. Employee Stock Ownership Plans, or ESOPs, give workers a direct stake in their employers and are linked to higher productivity and retention.
“Employee-owned businesses are more productive,” said Loren Rodgers, executive director of the National Center for Employee Ownership. “They’re more able to recruit people. People quit at lower rates. They’re more competitive.”
Corporate boards, however, continue to rely heavily on equity based incentives for top executives. Since the 1990s, compensation committees have shifted away from stock options toward stock awards, which they say encourage longer term decision making. Shareholders can cast advisory “say on pay” votes, but boards retain final authority over executive packages.
Critics question whether soaring CEO pay actually delivers better results. A 2021 MSCI study examining executive compensation from 2006 to 2020 found only a weak link between higher pay and stronger company performance. According to the study, average performing CEOs earned just 4 percent less than top performers, while firms with the lowest awarded CEO pay generated the strongest shareholder returns.
“This notion that the guy in the corner office is somehow almost single handedly responsible for company value, and everyone else is just little minions who don’t contribute much of anything … everyone can see that is not true,” said Sarah Anderson at the Institute for Policy Studies.
Despite the debate, CEO compensation continues to rise sharply. Median total pay for S&P 500 chief executives reached $17.1 million in 2024, up nearly 10 percent from the previous year, according to Equilar. CEOs now earn 192 times more than the average worker. Stock based incentives accounted for 72 percent of CEO pay packages last year.
The long term trend is even starker. Over the past five decades, top CEO compensation has jumped 1,094 percent, while typical worker pay has increased just 26 percent, according to the Economic Policy Institute.
That imbalance is drawing fresh attention as Elon Musk’s compensation once again resets the upper boundary of executive pay. Musk’s reinstated 2018 Tesla package is now valued at more than $130 billion, and a new performance based award could eventually be worth up to $1 trillion. With Tesla milestones ahead and a possible SpaceX public offering in 2026, Musk’s stock driven rewards could make him the world’s first trillionaire and intensify scrutiny of how corporate leaders are paid.
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