Most Paid CEO's Annual Compensation More Than Doubled Last Year — Could It Soon Reach $1.3 Billion?

Amid notable changes in executive compensation this year, Hock Tan, CEO of chipmaker Broadcom, was granted a $161 million stock award, elevating him to the ranks of the highest-paid CEOs. 

Given the recent stock surge in the company's stock, there is potential for his compensation to increase further, which garnered significant interest. The market currently values the underlying shares at more than $1.3 billion.

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Broadcom disclosed in its filings that Tan's stock award is meant to cover five years, with no additional equity grants or cash bonuses planned. Tan, Broadcom's CEO since 2006, must remain in his position and meet specific share price targets for the award to vest fully. 

As per the company's statement, Tan's compensation amounts to approximately $33 million annually for a five-year period. According to Wall Street Journal reports, initially, Broadcom valued Tan's one million restricted shares at $160.5 million, when granted at the end of October 2022, with shares trading at around $470. Broadcom shares closed last Friday at $1,407.84. 

Tan's shares will likely vest if the share price averages $1,125 over 20 trading days from November 2025, provided he stays at the chipmaker through October 2027.

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Tan is not alone in receiving substantial compensation. Charles Robbins of Cisco Systems saw his pay increase twofold to $65.5 million. Similarly, Adobe CEO Shantanu Narayen's 2023 compensation nearly doubled to $87.2 million. 

These numbers sharply juxtapose the average employee salary, roughly $59,428, prompting concerns about the equity of executive compensation.

Executive Pay Under the Microscope

The issue of high executive pay has been under increased scrutiny. In late January, a Delaware court invalidated Elon Musk's 2018 compensation package, citing a lack of independence in the Tesla board and a flawed approval process. This ruling, which resulted in Musk having to return $56 billion worth of Tesla shares, serves as a drastic reminder of the potential legal and financial implications of excessive executive pay. 

This also fueled the ongoing debate about the appropriateness of such large compensation packages. Critics argue that excessive executive pay contributes to income inequality and does not always correlate with company performance.

Some executives receive substantial pay regardless of the company's success, while others may manipulate short-term results to maximize their compensation at the expense of long-term stability.

According to a 2022 Economic Policy Institute report, CEO pay has skyrocketed by 1,460% since 1978. The report further argues that CEOs can set their pay and that more than 80% of their income is stock-related. They aren't more productive or skilled than regular workers, and there's no shortage of capable executives.

"The economy would suffer no harm if CEOs were paid less (or were taxed more)," the report concludes.

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