The days of enormous executive paychecks are numbered as firms contend with shareholder pressure, economic issues, and changing corporate governance.

For years, CEOs of America’s biggest companies, particularly those headquartered in New York, have earned astronomical paychecks, with some topping $100 million a year. But recent history suggests that those stratospheric paychecks are on the way out. In 2024, for the first time in more than a decade, no CEO took home a $100 million pay package. Instead, big business is trending toward more pay-for-performance compensation schemes, spurred by economic pressures, shareholder pressure, and changing corporate governance procedures.

So why is CEO compensation falling? Let’s take a closer look at the reasons remaking executive compensation in New York’s leading companies.

Shareholder Pushback and Public Scrutiny

One of the largest reasons for this transformation in CEO compensation is increasing shareholder and public dissatisfaction. Shareholders are more and more insisting that executive pay be linked to firm performance.

For instance, in 2024, a rebellion by shareholders at Paramount Group resulted in 50.3% rejecting a $20 million deal for CEO Albert Behler. This was a strong rejection considering his compensation had doubled from last year while the company’s stock had fallen close to 70% since the pandemic. It was a similar backlash at Vornado Realty Trust, where 43% of the shareholders rejected a $20 million compensation package for CEO Steven Roth, citing poor stock performance.

These incidents reflect a broader trend: shareholders want to see executives earning their pay, not receiving enormous packages regardless of how the company performs.

Economic Challenges and Market Volatility

The U.S. economy has faced numerous challenges in recent years, including inflation, interest rate hikes, and fluctuating stock markets. These factors have forced corporations to rethink their financial strategies, including executive pay.

In 2023, S&P 500 CEO pay rose by only 12.6% to a median of $16.3 million, a comparatively tame increase from past decades. Over 70% of this pay was in the form of stock awards, not base salaries. This change indicates that companies are increasingly valuing long-term performance over guaranteed high pay.

Altering Corporate Governance Practices

Corporate governance has also changed, calling for more equitable pay scales. Regulatory agencies, institutional investors, and consulting companies such as Institutional Shareholder Services (ISS) and Glass Lewis have been urging firms to tie executive compensation more directly to shareholder returns.

Consequently, most corporate boards have new policies that make it more difficult for executives to reap huge paychecks without producing robust performance. Rather than huge, guaranteed salaries, companies are increasingly using performance-based incentives, stock options, and long-term compensation plans that reward executives only if they generate value for investors.

Performance-Based Pay Becomes the Norm

Perhaps the most dramatic CEO compensation change has been the shift away from fixed salaries toward performance-based incentives. Although top managers continue to pull down millions, their capacity to cash out stock options or bonuses now hinges on how well their firm does.

For instance, Starbucks CEO Brian Niccol was the highest-paid executive in 2024 with a salary of $95.8 million. Although still a huge amount, it is less than the $100 million packages that were typical in previous years. This change indicates a new reality: CEOs now have to deliver to earn their high salaries.

Other companies such as Apple, Amazon, and Goldman Sachs have also overhauled their executive compensation plans with more long-term incentives. Tim Cook, for example, reduced his target compensation by 40% in 2023 to $49 million. Apple explained that this was done following shareholder criticism.

Public and Political Pressure

In addition to shareholder pressure, there is increasingly political and public pressure to lower excessive CEO compensation. The widening gap between worker and executive wages has fueled the debate over income inequality. To respond, some firms have cut CEO compensation voluntarily or linked it to employee compensation.

For example, Zoom CEO Eric Yuan reduced his compensation by 98% when he laid off 1,300 workers in 2023. Although some critics saw this as a symbolic gesture, it demonstrated a recognition of the increasing controversy over executive compensation.

Also, legislators have suggested new laws to rein in outrageous executive compensation. A number of states have debated policies that would tax companies with huge pay gaps between their CEOs and regular employees. Although these policies have yet to be instituted on a broad scale, they are part of a larger movement to restrict huge executive compensation.

The Future of CEO Pay in New York

So what lies ahead for CEO compensation in New York’s corporate universe? While executives will still make millions, the era of $100 million compensation packages seems to be at an end, at least for the time being.

As businesses come under greater pressure from investors, regulators, and the public, we will increasingly find performance-related pay schemes that reward long-term performance over assured high salaries. Shareholders will likewise continue to urge greater accountability, ensuring executive compensation tracks with company performance.

In a time of economic uncertainty and increased sensitivity to income disparity, the move toward more sustainable and equitable CEO compensation arrangements is not merely a fad—it could be the new norm.