The CEO, or chief executive officer, is arguably the most important position of a company. They make the major corporate decisions with advice and insight from others, acting as a liaison between the board and the public, and they manage the overall operations of the business. CEOs are also the highest-paid employees in the company, which makes sense, but it’s not small money at all. In the list of the richest people in the United States, most of them are CEOs or former ones, but the style of how they are receiving their money has changed a bit, especially for tech companies.
Companies have often avoided giving large salaries to CEOs lately, and instead have made their wealth increase with the increase in their stock. Of course, if a company’s stock is steadily increasing as time goes by, that means the company is growing and performing well. People like Jeff Bezos gained their wealth like that, and that makes sense as we saw his net worth explode in the later part of the 2010s when Amazon started to exponentially grow. Businesses have decided that expanding this method of pay would be smart, and it’s creating some remarkable stories. Now, they are offering CEOs major pay packages that include stock awards, and it’s not anything small, either. For example, Alex Karp, the CEO of Palantir, received a 1.1-billion-dollar compensation package recently, which is crazy! This allows new start-up founders to gain wealth rapidly and be well compensated, but it isn’t just the business throwing money at their leader. These packages are achieved through company milestones, whether it’s the stock price or revenue number, so the goal of this system is to incentivize the CEO to pursue rapid growth and grow the business well. It makes for an interesting strategy, but many oppose it as they believe it gives the CEO too much power and makes them wealthier than they need to be. It does seem to be working, though, so this is one of the more unique things companies are doing. What do you think about these pay packages?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.