What do you believe the typical CEO’s salary is? Several million? Or even a few dozen million? According to a recent survey, if you’re like most Americans, you’re probably estimating way below the mark. That is because the majority of workers believe CEOs make $1 million each year.
However, the true figure is roughly ten times higher. Executive salary has recently become a controversial topic, causing some high earners, such as Facebook founder Mark Zuckerberg and former Twitter CEO Jack Dorsey, to accept little or no salary at all.
So, how much does a CEO make? Read on to find out!
How Much Do CEOs of Startups Earn?
Early-stage businesses mostly have a limited budget, notably before raising major venture capital. Moreover, startup Chief Executive pay can be difficult to evaluate, especially when CEOs set their own salaries. But how much a startup CEO makes mostly depends on several factors. Here are some of them.
- Company Stage. CEOs of early-stage startups usually earn less than those of late-stage companies.
- Funding and Cash Flow. Firms that have raised more capital or had already begun to generate a profit may afford to pay their executive more.
- Location. Salary levels are often higher in locations with a high cost of living, such as London, New York City, or Silicon Valley. But this might change over time considering the rising trend toward remote work.
- Industry. The industry you are working in will influence how much funding you can raise. For instance, a tech company founder working in biotech usually has a higher pay than a founder in the agriculture field.
- Company culture. There are startup CEOs who choose to be paid a minimal salary to set a good example for the firm and foster a culture of lean efficiency.
So, after taking all that into account, how much does a CEO make? Venture capitalist and entrepreneur Peter Thiel, for example, estimates that the typical yearly CEO wage for seed-stage businesses ranges between $100,000 and $125,000. And he is right, at least according to the statistics.
ZipRecruiter claims that the average income for a startup CEO position is little more than $110,959 per year. This number can vary from $43,000 in the 25th percentile to $156,000 in the 75th percentile, with the 90th percentile at $274,500.
How Much Does a CEO Make in a Small and Medium Company?
When checking small or medium company’s Chief Executive pay, there are some things to keep in mind.
- Risk and Reward. Pay for performance is the common compensation approach that links executive pay to the firm’s success.
- Bonuses. CEOs usually get bonuses based on the company’s success to motivate them to work harder and make better decisions for investors.
- Stock Options. Companies give CEOs stock options to connect Chief executives’ financial interests with those of the shareholders.
Therefore, how much does a CEO in a small company earn? An average CEO of a small to medium-sized company may expect to get a six-figure compensation in the low 200s. In fact, the average CEO salary for mid-sized businesses in 2020 was $210,000 per year. That is a significant growth compared to 2018 when a typical small business executive usually earned $131,729.
In 2018, the small business CEO earned between $25,486 and $678,008, with a median pay of $122,107. The middle 57% made between $122,107 and $307,254, while the top 86 percent earned $678,008. The highest average wages were in San Francisco, where the salaries were at $198,164. That means the CEOs there earned 50% more than the average.
Large Corporations and Massive CEO Compensation Packages
Chief Executives of international conglomerates and large American enterprises have the highest earnings among all CEOs. Even though there aren’t many people in this group, they usually shift the CEO pay scale toward the seven-figure or eight-figure level.
The typical CEO wage is roughly $2.5 million per year in such big companies. In general, this pay does not include stock options or other benefits that can add up to $10 million to a Chief Executive’s complete salary package and overall net worth. Most executives of such corporations also earn something called “golden parachutes.” This substantial severance compensation can further raise their income levels even if their tenure at the company does not work out.
In 2018, a big corporation CEO’s yearly salary based on options exercised was $17.2 million. But each year, that number continues to grow. For example, in 2019, there was a 14% increase, with an average executive from one of the top 350 companies in the US earning $21.3 million.
According to Bloomberg, in 2020, the highest-paid CEO was Tesla’s Elon Musk, who earned the staggering $6,658,803,818. The second place, but admittedly far below in sum, was Oak Street Health’s Mike Pykosz with a $568,442,024 wage.
Who Are the Famous CEOs with the Lowest Pays?
Salesforce’s Marc Benioff gets a wage of $1 at the IPO, while Nant Health’s Patrick Shiong receives no pay at all. Jack Dorsey of Square earns only about $3,500. Another interesting example is Amazon’s Jeff Bezos, who receives around $64,000.
Having said that, these people were already affluent before the IPO. Still, it’s always nice to see a CEO decline a large compensation if they don’t need one. It sets a good example for the rest of the firm, fosters a cash efficiency/frugality culture, and demonstrates a founder who prioritizes the company before themself.
Top Ten Countries with the Highest Chief Executive Wages
The United States remains the best place to be working as a CEO, at least salary-wise. That is because the highest-paid executives reside there, with California ranking first in the nation in terms of average CEO pay. In fact, the top five states with the best salaries for founders are California, Illinois, New York, Massachusetts, and Florida. New Jersey, Texas, and Pennsylvania also follow closely behind.
Aside from the US, countries with the highest CEO salaries include India, the United Kingdom, South Africa, the Netherlands, Switzerland, Canada, Spain, Germany, and China.
So, How Much Does a CEO Make and Is It Worth It?
With wages that start virtually universally above $200,000 per year, the average Chief Executive has a pretty hefty salary and is the top earner for the company. But before we get blindsided by the numbers, we need to take into account the experience and skills required to succeed in this role. Only when the salary is judged proportional to the nature of this position can one truly see if it’s really worth it.