Why Texas is the Best Place to be a CEO
Business leaders in the Lone Star State get the most bang for their buck.
Stories about executive pay usually focus on the millions earned by CEOs at Fortune 500 companies. Salaries fall off quickly as we expand the pool to also include smaller enterprises.
For the nation as a whole, an average CEO makes $176,550 a year. CEO incomes differ from one part of the country to another. Among the 14 largest U.S. metropolitan areas, the Bureau of Labor Statistics puts New York at the top with average annual CEO earnings of $217,710. It’s followed closely by Los Angeles at $215,220. Houston comes next at $212,010—a reflection of the huge presence of the high-paying energy industry, no doubt (see bottom left chart).
Among the nation’s top metropolitan areas, Dallas-Fort Worth sits back at $194,050. Cleaving North Texas in two, BLS reports average CEO pay is $198,250 for Dallas and its suburbs and $178,970 on the Fort Worth side.
The cost of living varies among metropolitan areas, however, so it’s important to adjust for differences in taxes, housing costs, and other expenses. By using the cost-of-living adjustment (COLA) calculator at salary.com, we can see how the metropolitan areas stack up in terms of the CEOs’ living standards, measured relative to DFW.
Under this scenario, Houston jumps to the top with COLA-modified CEO pay of $254,848. DFW comes next, vaulting past six other metropolitan areas (see bottom right chart). New York’s high cost of living pushes it all the way to the bottom, at $122,525.
Now, let’s look at the work environments for these CEOs (top chart). For 2012, Chief Executive magazine proclaimed Texas as the best state to do business in for the eighth straight year. Los Angeles and San Francisco CEOs toil in the worst state for business.
Dallas ranks eighth among the 200 cities on Forbes’ “Best Places for Business” list, with Houston coming in at a respectable No. 20. Detroit and Miami CEOs should be envious.
All told, being a CEO in Texas turns out to be a pretty good gig. COLA-modified income suggests Texas CEOs get compensated quite well. And they work in a place with a genial business climate.