In this article, we’ll examine the reasons behind Alphabet CEO Sundar Pichai’s staggering $226 million earnings in 2022, as well as the compensation of other top executives in the tech industry.
Key Takeaways:
In 2022, Sundar Pichai, CEO of Alphabet, Google’s parent company, received an astonishing $226 million in earnings.
The bulk of Pichai’s income came from stock awards, which accounted for $218 million of his total compensation package.
His base salary remained unchanged at $2 million, the same level it has been since 2020.
Alphabet provided Pichai with a considerable security detail, which cost almost $6 million.
This security expenditure highlights the importance of safeguarding the company’s top executive.
Pichai’s stock awards are given every three years, with his last substantial award coming in 2019, totaling $280 million.
Stock awards play a significant role in the compensation packages of many top executives.
These awards often account for the majority of a CEO’s earnings, as they are tied to the company’s performance.
By providing stock as part of an executive’s compensation, companies incentivize their leaders to focus on long-term growth and shareholder value.
In the case of Sundar Pichai, more than 96% of his 2022 earnings came from stock awards.
This proportion aligns with the broader trend of increasing stock-based compensation for top executives.
The Economic Policy Institute found that over 80% of executive pay is typically stock-related.
Pichai’s $226 million earnings make him one of the world’s highest-paid CEOs.
However, other top executives at Google also received substantial compensation packages in 2022.
For instance, Prabhakar Raghavan, senior vice president of knowledge and information at Google, and Philipp Schindler, Google’s chief business officer, each earned around $37 million.
Both Google and Alphabet CFO Ruth Porat and Kent Walker, chief legal officer, made approximately $24.5 million.
In comparison, Apple CEO Tim Cook received a pay cut for 2023, reducing his earnings to $49 million, 40% lower than in 2022.
Cook’s decision came after previous years’ large compensation packages stirred controversy among shareholders.
Elon Musk, on the other hand, sold nearly $23 billion worth of Tesla shares in 2021 to finance his takeover of Twitter, making him arguably the best-paid boss that year.
Pichai’s record-breaking earnings come at an awkward time, as Alphabet recently announced significant layoffs and job cuts.
In January, the company revealed plans to cut 12,000 jobs, representing a 6% reduction in its total workforce.
Pichai took responsibility for the decisions leading to these cuts, stating that the company had hired for a different economic reality than what it currently faces.
He explained that Alphabet had undergone a “rigorous review” and that jobs were being eliminated across all “product areas, functions, levels, and regions.”
The massive compensation packages received by CEOs like Sundar Pichai have sparked heated debates in recent years.
Critics argue that the exponential growth in executive pay contributes to widening income inequality and leaves fewer gains of economic growth for ordinary workers.
Since 1978, CEO compensation has skyrocketed by 1,460%, as reported by the Economic Policy Institute.
This dramatic increase has fueled the growth of the top 1% and top 0.1% incomes, further widening the gap between the highest earners and the bottom 90% of the population.
The median compensation for an Alphabet employee is just under $280,000, according to the company’s filing.
This figure means that Pichai’s salary is more than 800 times larger than the median employee’s earnings.
To put this into perspective, a worker earning California’s $15.50 minimum wage would need to work 14.6 million hours, or over 7,000 years (with 40-hour work weeks and no time off), to match Pichai’s 2022 salary.
This growing disparity in pay has led to calls for increased transparency and equity in executive compensation.
Critics argue that such enormous pay packages for CEOs do not benefit the overall economy and contribute to income inequality.
The Economic Policy Institute’s analysts contend that the economy would not be harmed if CEOs were paid less or taxed more.
In response to these concerns, some top executives have taken voluntary pay cuts. As mentioned earlier, Apple CEO Tim Cook reduced his 2023 pay by 40% after facing criticism from shareholders.
Cook’s compensation in 2022 and 2021 had reached $100 million, with the majority tied to company shares and dependent on share price performance.
Shareholders voted against Cook’s pay package after Apple’s stock fell nearly 27% in 2022.
While the vote was nonbinding, Apple’s board’s compensation committee stated that Cook had requested the reduction.
The question of how the tech industry will address the issue of ballooning CEO compensation remains open.
As income inequality continues to be a pressing concern, the debate surrounding executive pay is unlikely to abate anytime soon.
Companies and their shareholders will need to carefully consider the balance between incentivizing top executives to drive growth and fostering a more equitable distribution of wealth within the organization.
