Supersized CEO Pay Is Mostly a Gift to CEOs

The Promise Versus the Payoff

The pitch from corporate boards is always the same: pay the CEO an astronomical sum, tie it to performance targets, and watch shareholders reap the rewards. It is a clean story. It is also, according to fresh data, largely fiction.

New analysis from Equilar, published in the Wall Street Journal and highlighted in this week's episode, examined the roughly 20 firms that introduced moonshot CEO compensation packages after 2018, modeled on the structure of Elon Musk's headline-grabbing deal with Tesla. The companies in the sample include names like KKR, Rivian, Roblox, and Robinhood. The verdict: three quarters of them underperformed the S&P 500 in shareholder returns. Only a handful produced the exceptional financial outcomes that boards used to justify approving the packages in the first place.

As Neeta frames it, boards are selling performance-linked pay while shareholders too often receive mediocre results. The executives, meanwhile, collect regardless.

Why Boards Keep Approving These Deals

The persistence of mega packages despite underwhelming evidence is itself an interesting economic puzzle. Part of the answer is selection bias in how success gets reported. When a package works, it becomes a case study. When it does not, it becomes a footnote. Boards also operate under genuine uncertainty: at the time of approval, a nine-figure package tied to ambitious stock targets can look like a prudent bet rather than a giveaway.

There is also a structural problem. Compensation committees are typically composed of fellow executives and directors with their own generous pay arrangements. The incentives to scrutinize the logic of supersized pay are weak. The incentives to approve and move on are strong.

Median CEO pay now sits at approximately $16.4 million, a figure that has climbed steadily even as the evidence for returns on those dollars remains thin.

The Broader Accountability Gap

This episode's CEO pay story sits alongside a broader theme that runs through the week's news: the gap between what powerful institutions promise and what they actually deliver for everyone else.

On tariffs, a new German economic study using shipment-level data covering 25 million transactions and nearly $4 trillion in trade found that US consumers bear approximately 96% of tariff costs. Foreign exporters absorb just 4%. US customs revenue surged by $200 billion in 2025, and that money came from American households and businesses, not from the trading partners the tariffs were designed to pressure. Neeta calls it an own goal, and the data supports the description.

The home ownership picture adds another layer. A new economic model projects that people born in the 1990s will hit retirement with home ownership rates roughly 9.6 percentage points below their parents. The more troubling finding is what happens after people conclude that ownership is out of reach: they save less, take on more risk, and reduce their labor supply. The model shows these behaviors compounding over a lifetime, widening wealth gaps further.

What It Means Going Forward

The CEO pay data matters beyond the numbers themselves. Corporate governance relies on the idea that compensation structures align executive incentives with shareholder outcomes. If the evidence consistently shows that alignment is not happening, the rationale for approving these packages collapses. Institutional investors and proxy advisers are paying closer attention, but the Equilar findings suggest that scrutiny has not yet translated into discipline at the board level.

One related note from this week: the US has negotiated an exemption for American multinational firms from the global minimum tax agreement. Neeta flags this as a short-term win for investors that creates longer-term arbitrage risks. The pattern is familiar. Structure a deal that looks good for a narrow set of interests, call it performance-linked or strategically sound, and leave the broader costs to surface later.

The CEO pay story is a clean example of how that pattern works inside the boardroom. The data is now clear enough that the next question is whether anyone with actual authority over compensation decisions will act on it.