Chief executive compensation at S&P 500 companies reached a new peak in 2025, with average pay climbing to $22.8 million—a 21% increase from the prior year, according to the AFL-CIO's annual Paywatch report. The labor federation, which has tracked executive pay since the 1990s, said the figure represents the highest average it has recorded, underscoring a year of outsized awards and shifting boardroom dynamics.
The surge was propelled by a wave of "mega-pay" packages, many of which borrow from the playbook of Tesla CEO Elon Musk's extraordinary compensation deal. In November, Tesla shareholders approved a restricted stock plan for Musk that the company valued at $158 billion, with a potential payout of roughly $1 trillion if he meets performance milestones over the next decade, including growing Tesla's market capitalization to $8.5 trillion. When that package is included, average S&P 500 CEO pay balloons to $340.1 million—more than 14 times the combined compensation of all other S&P 500 chief executives, per AFL-CIO calculations.
Musk's deal has also made him the world's first trillionaire, a status built largely on his stake in SpaceX, the satellite and AI company he also leads. The arrangement is now a benchmark for other boards, according to Fred Redmond, the AFL-CIO's secretary-treasurer, who told Reuters that Musk's pay "changes the dynamic when other CEO compensation plans come up." Boards are increasingly treating the Tesla deal as a reference point when negotiating their own executives' terms, he said.
That dynamic helps explain why 2025 produced not just a record average but a proliferation of one-off "special" awards that sit outside standard annual pay programs. Compensation consultant Semler Brossy has flagged these awards as an emerging "hot-button issue" in shareholder voting. For financial advisors managing client portfolios with meaningful exposure to large-cap equities, rising CEO pay—particularly the arrival of trillion-dollar-style incentive structures—is increasingly a governance factor that institutional investors and proxy advisors weigh when casting "say on pay" votes. Those votes can signal board discipline, or the lack of it, on capital allocation.
The pay ratio between CEOs and workers also widened. The AFL-CIO's data shows the average ratio across the S&P 500 rose to 312-to-1 last year, up from 285-to-1 in 2024, excluding Musk's Tesla compensation. Including it, the average ratio balloons to 5,387-to-1. Redmond attributed part of the widening gap to stagnant wage growth, which he linked to the spread of artificial intelligence in the workplace and to a Republican-controlled National Labor Relations Board that labor leaders view as less receptive to union organizing.
By contrast, median annual wages for all U.S. workers stood at $69,770 as of May 2025, up 3% from a year earlier, according to the U.S. Bureau of Labor Statistics. A separate analysis by Oxfam found that U.S. CEO pay grew roughly 20 times faster than worker wages in 2025. The divergence is drawing attention from investors and policymakers alike, particularly as active ETFs dominate 2025 launches and RIAs drive record flows, reflecting broader shifts in how capital is allocated.
Not all shareholders are embracing the trend. Semler Brossy found average support for advisory "say on pay" votes at S&P 500 companies stood at 90.6% through late June, up modestly from 89.4% for all of 2025. Among the highlights, Goldman Sachs paid chief executive David Solomon $118.9 million, including a large retention award. Only 71% of shares cast supported the pay in an advisory vote—below the S&P 500 average. A Goldman Sachs spokesman said the firm was pleased with the "strong supermajority" the vote received.
The record pay levels come as SpaceX shares plunge 19% amid an AI capex surge that overshadows record revenue, highlighting the volatility in sectors tied to Musk's ventures. For advisors, the governance implications of mega-pay packages are becoming harder to ignore, especially as annuity sales hit a record $123.9B in Q2 2026 amid Fed hawks and geopolitical tensions, underscoring the need for diversified strategies in uncertain markets.
