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When a company hires a new chief executive, the CEO’s paycheck gets the headline. But the real cost often extends across the leadership team and can continue to spiral long after the appointment is announced.
According to Diligent Market Intelligence (DMI) Compensation data (based on available filings at mid-July), cash sign-on bonuses for new S&P 500 CEOs reached a six-year high in 2025 while severance for departing CEOs also climbed.
The spike in costs comes as CEO turnover has accelerated over recent years.
“I wouldn’t say they’re necessarily becoming more expensive,” said Ed Steinhoff, managing director at Pearl Meyer. “I would say there have been more of them in the last couple of years.”
According to DMI Governance data, almost 40 S&P 500 CEOs had departed by the end of June this year with 67 such executives transitioning during 2025, up 29% on the level of churn recorded in 2023.
Joining incentives
CEO transitions have become a balancing act for companies looking to attract top talent while also retaining existing executives.
Cash sign-on bonuses for S&P 500 CEOs totaled $14.8 million for fiscal 2025, just below the $15.3 million recorded a year earlier and 82% higher than the amount recorded in 2020.
The average sign-on bonus at the S&P 500 reached $3.7 million in 2025, up from $3 million in 2024, and $2.4 million in 2023.
For 2025, bonuses were concentrated in a handful of large payments. MGM Resorts International recorded an $8-million bonus for William Hornbuckle, in what was essentially a re-signing bonus, given that he has served since 2020, while Starbucks recorded a $5 million award for Brian Niccol, in the second of two installments. Baxter International's Andrew Hider and Crown Castle’s Christian Hillabrant also appeared among the recipients.
Many of the hiring companies described the payment as a “make-whole” bonus to compensate executives for compensation they forfeited by leaving their previous job.
“Make-whole awards are very much par for the course,” said Serdar Sikca, a principal at compensation consultant FW Cook. “That is literally just buying somebody out of the compensation that they already possess, or they’re owed at their former employer.”
CEO hiring packages also include restricted stock units (RSUs), performance stock units (PSUs) and long-term incentive (LTI) grants.
“If you want to then entice the executive to go through this and join you, then companies also need to give something on top, i.e. an inducement award,” explained Sikca.
But he cautioned that such awards are more defensible when linked to shareholder outcomes.
“They are much more palatable when those types of inducement awards are structured in a shareholder-friendly and shareholder-aligned manner, such as being tied to rigorous stock-price goals or based on the current performance metrics of the company. You want them to be, for better or for worse, exposed to your stock price.”
Pay to stay
The spending may not stop when the CEO accepts.
Executives passed over for the top job can become flight risks once the board chooses someone else, particularly when an external candidate is chosen.
“The last thing you want is a CEO coming in from outside or a CEO candidate being promoted from within and having the rest of the senior executive team leave because they weren’t selected as CEO,” Steinhoff said.
Those executives may hold the institutional knowledge the new CEO needs, and competitors may see an opportunity to recruit them. Boards may therefore issue retention awards to stabilize the management team during the transition.
Nike’s 2024 CEO change illustrates how the cost of a leadership transition can extend far beyond the incoming executive’s sign-on bonus. Along with payments to incoming CEO Elliott Hill, Nike awarded five other C-suite executives retention grants totaling $22 million to support leadership continuity.
The parting price
While the cost of bringing in or retaining talent continues to rise, so too does the price of ushering former CEOs out.
Cash severance totaled $20.5 million in fiscal 2025, up about 20% from $17.1 million the previous year.
Much of the severance pay seen in 2025 had been influenced by shareholder activism.
CSX came under pressure from Ancora Holdings, which urged the railroad to explore merger options or replace CEO Joe Hinrichs, who went on to receive $8.3 million on his departure last September.
Air Products and Chemicals CEO Seifi Ghasemi stepped down in February 2025 with $7.3 million in severance, after activist Mantle Ridge won three board seats at the company's January annual meeting.
Severance arrangements themselves have not necessarily become more generous. “The multiple remains the same because there are structures around these things,” Sikca said.
The dollar amount, however, can rise in line with broader inflation in executive compensation.
According to DMI data, the median granted pay for an S&P 500 CEO in 2025 was $18.2 million based on filings examined by the end of H1, up from $16.9 million in 2024.
Shareholder revolts
Shareholders, meanwhile, have been ready to challenge what they consider excessive up-front payments to CEOs or the board's inability to justify them.
At software company Procore Technologies' June annual meeting, its "say on pay" vote was met with almost 37% pushback, with shareholders noting that CEO Ajei Opal received an inducement award “which was nearly four times the value of the total median pay for peer CEOs.”
Lumentum also saw support for its "say on pay" vote fall to 88%, while its 2025 equity incentive plan received only 82% support, with shareholders citing a $2 million cash signing bonus for Michael Hurlston, who became CEO in February 2025.
“It’s very important that [the awards] mimic shareholder experience in the long run rather than, ‘here’s cash in hand’ - which doesn’t have any shareholder alignment,” said Sikca.
For boards, that may be the clearest lesson from a costly CEO transition: shareholders are more likely to tolerate large awards when they rise and fall with performance, not when they amount to cash in hand. As companies spend more to recruit, retain and replace top leaders, the biggest risk may be not the size of the check itself, but whether investors believe it was earned.
