Trends in S&P 500 CEO Compensation: A 12-Year Review of Pay Structures

In a detailed examination of executive compensation trends within the S&P 500 over the past twelve years, researchers from Semler Brossy reveal significant shifts in how companies incentivize their chief executive officers (CEOs). The findings suggest a marked alignment of long-term incentive (LTI) designs with the preferences of institutional investors and proxy advisors, highlighting an increasing prevalence of performance stock units (PSUs) and restricted stock units (RSUs), alongside a notable decline in the use of stock options.

According to the analysis by Margaret Hylas, Principal at Semler Brossy, and Leah Sine, Associate, the proportion of S&P 500 companies utilizing PSUs has risen dramatically, from 76% in 2012 to 95% in 2025. Furthermore, PSUs now constitute an average of 60% of the CEO LTI mix, indicating a clear trend towards performance-based pay structures. Conversely, the usage of stock options has decreased significantly, with only 42% of companies employing them in 2025, down from 68% in 2012, as options have come to represent an average of merely 13% of the LTI mix.

This shift reflects a broader evolution in executive compensation strategies, as companies increasingly seek to balance performance management with risk mitigation. The rise of RSUs, which 77% of companies currently use—up from 58% in 2012—further underscores this trend. RSUs, while linked to stock price, are perceived as less directly tied to performance metrics compared to PSUs, raising questions about their effectiveness as an incentive tool.

The report also highlights changes in vesting schedules for equity incentives. Firms have largely adopted three-year PSUs as the standard for performance-based equity, which has contributed to a shorter vesting period across other vehicles. This shortening may be attributed to external stakeholder pressures emphasizing performance and the competitive necessity for companies to retain top executive talent. As noted by Hylas and Sine, "the design of executive pay has become more short-term oriented as PSUs increased."

The research methodology employed by Semler Brossy involved a comprehensive analysis of Grants of Plan-based Awards (GOPBA) data, focusing on fiscal years ending December 31 for each year analyzed. The study excludes partial-year CEO terminations and interim roles, ensuring a robust dataset that reflects ongoing trends in executive compensation.

The implications of these findings are significant for understanding the landscape of corporate governance and executive accountability. As compensation structures evolve, they may influence not only CEO performance but also broader corporate strategies as stakeholders demand greater transparency and alignment with long-term value creation.

In conclusion, the ongoing changes in executive compensation practices within the S&P 500 reflect a dynamic interplay of market forces, stakeholder expectations, and evolving corporate governance standards. As the landscape continues to shift, companies will need to navigate these complexities to ensure that their compensation strategies remain competitive and aligned with the interests of their investors and the broader market dynamics.