Where Will a CEO Get Paid the Most?

Investing, Investments

Everyone knows that going to the right school and working hard will get you a better paying job, but did you ever think that choosing the right place to live might be just as important a factor?

According to the Bureau of Labor Statistics, the mean CEO salary in the U.S. is $176,550. This puts them behind doctors ($234,950) and dentists ($204,670). However, this is including all 267,370 chief executives in the country, and fails to include elements of CEO compensation besides salary, such as bonuses, stock, and pensions. By looking at the full compensation given to the top earners of the largest companies in the U.S., we were able to focus solely on those executives at the very top of their field, and saw a much different picture.

NerdWallet looked at the highest paid executives at every S&P500 company and found that, even amongst industry leaders, job location is a major factor in determining pay.

The following shows the locations of all U.S. headquartered S&P500 companies:

How do the states stack up in comparison?

In terms of location, S&P500 companies were mostly dispersed along the coasts, with clusters around the Great Lakes and South-East. These states beat all others in terms of sheer numbers:

  • 65 companies included in the S&P500 index are headquartered in California, making it first in the country in terms of sheer number. Of those located in the golden state, 46 are located in the San Francisco Bay Area, which is home to such technology giants as Oracle, Google, and Apple.
  • Second and third place go to New York with 55 companies and Texas with 51. The city of Houston alone has 24 companies headquartered within it.
  • If you were to consider the entire New York Metropolitan Area, it would outnumber every other region, with 79 companies.

As hubs of finance and technology, you might expect that executives in these states would clearly be paid the most, but we found a somewhat different story when looking at the compensation breakdown:

  • Indiana actually has the highest average compensation for top executives with $33.2 million.
  • California follows with $21.2 million, and then New York with $16.6 million.
  • Missouri was the state with the lowest pay, with only $7.4 million average compensation for their top-paid executives.
  • Not surprisingly, New York has the greatest population of S&P500 companies, with 43 headquartered within the city. However, the city’s top executives only earned an average  annual compensation of $8.1 million.
  • Seattle took the top spot with a mean compensation of $40.4 million. Among the lowest was Cincinnati in Ohio, with just $5.7 million.

The following is a map of the U.S. that is shaded according to the mean pay of their top executives, with the darkest green representing those states with the highest average compensation:

How do companies outside the U.S. compare?

The majority of companies within the S&P500 index are located in the U.S., but there are currently ten located in foreign countries. Of these, half are headquartered in Ireland, one is located in Bermuda, and the rest are based in Switzerland. Amongst the top-paid executives of these companies, the average compensation was $15.5 million, which exceeds the U.S. average of $13.3 million.

In such an interconnected global community, how is location still so important?

Companies have more resources available to them today than ever before. Supplies can be shipped from anywhere in the world, employees can be recruited from any country, and business interaction can occur across thousands of miles. The relationship we seem to be seeing between executive compensation and location could be occurring for a variety of reasons; for example, regional variation in cost of living or greater competition for top talent in certain cities.

Methodology

All data was collected using the 2011 SEC filings of S&P500 companies. Since the data collection, the Sara Lee Corporation of Illinois, Progress Energy of North Carolina, the Sears Holding Corporation of Illinois and the Goodrich Corporation of Ohio have been removed from the S&P500 index (but their compensation figures contributed to the state averages). All regions analyzed individually contained at least 1% of the 500 total companies (e.g. Utah would have been the state with the lowest executive salary, except there are less than five companies from the S&P500 index located in the state, so it was not considered to be adequately represented).