Elon Musk has grabbed plenty of headlines this year — and not all because of his role as Tesla CEO.
But that role took center stage in early September when the Tesla board of directors proposed a $1 trillion compensation plan for Musk. If approved, it would be the “largest corporate pay package in history,” according to Reuters.
Trending Now: I Asked ChatGPT What Would Happen If Billionaires Paid Taxes at the Same Rate as the Middle Class
Read More: 5 Types of Cars Retirees Should Stay Away From Buying
Obviously, most business executives will never earn anywhere near $1 trillion. The median pay for CEOs was $206,420 a year as of May 2024, according to the latest data from the U.S Bureau of Labor Statistics. The median pay for all types of top executives was $105,350.
Those are very good salaries — but they won’t necessarily make you fabulously wealthy. So how do CEOs and other execs really get rich? Here’s a closer look.
Choose The Right Employer
Maybe the biggest factor in how executives get rich is the company they work for. A company’s size and “complexity” were cited first in a list of seven factors that influence executive compensation, according to a study from the Yale School of Management.
As the study noted, large companies “make more profits” and pay their executives other benefits beyond just the base salary. Meanwhile, smaller firms and startups make less money and their executives “have fewer responsibilities,” so they earn less money.
This is backed up by the numbers. While the median CEO pay across all companies is less than $207,000 a year, that figure is a whole lot bigger for CEOs of companies that belong to the S&P 500.
An analysis from the AFL-CIO found that in 2024, CEOs at S&P 500 firms earned an average total compensation of $18.9 million a year — more than 90 times higher than the typical CEO pay.
For You: The No. 1 Way Americans Become Millionaires Is Pretty Boring — and Easy To Do
It’s Not Just About Salary
For the richest CEOs, annual salary plays a comparatively minor role in overall compensation. The lion’s share of their wealth comes from bonuses, stock holdings and other perks and incentives.
Here’s a breakdown of how the typical CEO of an S&P 500 company is compensated, according to the AFL-CIO:
| Pay Type | Average Amount |
| Salary | $1,265,452 |
| Bonus | $3,918,737 |
| Nonequity incentives | $3,183,079 |
| Restricted stock | $8,968,909 |
| Stock options | $1,087,760 |
| Retirement plans | $1,198,469 |
| Other perks | $807,623 |
Additional Factors
Other factors that play a role in how senior executives get rich include the following, according to the Yale School of Management.
- Industry type: Certain industries generate a lot more revenue than others — including technology and healthcare. Executives in the biggest industries tend to earn much higher pay than those in smaller or less essential industries.
- Competition for skills: Execs with skill sets that are in high demand are much better compensated than those who are easily replaceable. That’s partly why CEOs like Berkshire Hathaway’s Warren Buffett and Meta’s Mark Zuckerberg are among the world’s richest people.
- Company performance: When a company does well, its top execs also tend to do well through large bonuses and other performance incentives.
More From GOBankingRates
- 3 Little-Known Social Security Rules That Could Save You Thousands
- I Paid Off $40,000 in 7 Months Doing These 5 Things
- 10 Cars That Outlast the Average Vehicle
- How Much Money Is Needed To Be Considered Middle Class in Your State?
This article originally appeared on GOBankingRates.com: How Do CEOs and Other Executives Really Get Rich?
