Executive compensation at America’s largest companies reached unprecedented levels in 2025, with increasingly massive incentive packages for chief executives becoming more common across the S&P 500.
A new study from the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) found that average compensation for S&P 500 CEOs climbed 21% to $22.8 million in 2025, excluding Elon Musk’s compensation from Tesla and SpaceX. That represents the highest level recorded since the labor federation began tracking executive pay in the 1990s.
The sharp increase is being attributed partly to the growing influence of extraordinary compensation packages modeled after Musk’s massive Tesla award.
Musk’s pay package changes the benchmark
Musk’s compensation arrangements have dramatically changed expectations around how much corporate boards are willing to offer top executives.
Tesla shareholders approved a restricted-stock package last November that the company valued at approximately $158 billion. The package could ultimately be worth as much as $1 trillion if Musk achieves all of the required performance targets.
Labor officials argue that the size of Musk’s compensation has created a new benchmark for other CEOs. When companies negotiate special compensation packages for their executives, boards can point to Musk’s deal as evidence that extraordinary rewards are becoming increasingly acceptable.
Fred Redmond, AFL-CIO secretary-treasurer, said Musk’s compensation has changed the dynamic surrounding CEO pay because boards can use his package as a reference when considering their own executive compensation plans.
When Musk’s compensation is included in the calculation, the average S&P 500 CEO compensation figure jumps dramatically to approximately $340.1 million for 2025.
CEO-worker pay gap widens
The rapid growth in executive compensation has also intensified concerns about income inequality in corporate America.
According to the AFL-CIO study, the average CEO-to-worker compensation ratio at S&P 500 companies increased to 312-to-1 in 2025, compared with 285-to-1 the previous year, excluding Musk’s Tesla compensation.
When Musk’s Tesla package is included, the ratio rises to an extraordinary 5,387-to-1.
The figures have fueled criticism from organized labor, particularly at a time when many American workers are struggling with rising housing, healthcare and other household expenses.
Average annual wages for U.S. workers reached approximately $69,770 in May 2025, representing a 3% increase from the previous year, according to U.S. Labor Department data.
AI adds to workers’ concerns
Labor leaders also argue that the rapid adoption of artificial intelligence could place additional pressure on employees.
As companies increasingly use AI to automate tasks and improve productivity, unions are concerned that workers may not receive a proportional share of the economic benefits generated by new technologies.
Redmond said employees are increasingly frustrated by what they see as a widening gap between corporate executives and ordinary workers.
At the same time, union membership and representation have been showing signs of renewed strength. Labor leaders say nearly half a million workers joined unions in 2025, contributing to the highest level of union representation growth in 16 years.
Shareholders still largely approve CEO pay
Despite criticism from labor organizations, most shareholders continue to support executive compensation through advisory “say on pay” votes.
Through late June, S&P 500 companies received an average 90.6% shareholder approval for their executive compensation plans, according to compensation consulting firm Semler Brossy. That compares with 89.4% for the full year in 2025.
However, support becomes more complicated when companies introduce extraordinary, one-time compensation awards.
Semler Brossy described these special awards as a “hot-button issue”, because they generally sit outside normal annual compensation structures and can involve enormous sums.
Goldman Sachs highlights the debate
One example is Goldman Sachs, where CEO David Solomon received approximately $118.9 million in total compensation in 2025, including a significant retention award.
While a majority of shareholders supported the package, the approval rate was only 71%, well below the broader S&P 500 average.
Goldman Sachs defended the result, saying it was pleased with the strong majority of shareholders who supported the compensation plan.
A growing debate over corporate inequality
The rise in CEO compensation is likely to remain a major political and economic issue in the United States.
Supporters of large executive packages argue that CEOs should be rewarded when they successfully increase shareholder value, expand companies and deliver exceptional business performance. Critics counter that compensation packages worth tens or hundreds of millions of dollars are increasingly disconnected from the wages earned by ordinary employees.
The debate has become even more significant as companies embrace AI, automation and other technologies that could reshape the labor market.
The growing influence of Musk’s compensation deals suggests that the era of traditional CEO pay may be changing. As boards become more comfortable with enormous performance-based awards, the question facing corporate America is no longer simply how much CEOs should earn—but how much inequality shareholders, employees and the broader public are willing to accept.
