Lady Business: The CEO pay is too damn high. Can anything bring it back to earth?
Hello, and welcome to Lady Business, a newsletter about women, the business world, and all the ways they overlap. You can sign up for Lady Business and read previous issues here. This is the 141st issue, published June 19, 2022.
Maximum Wage
Happy Juneteenth, happy Father’s Day, and happy summer, everyone. This newsletter may be a bit more sporadic than usual this summer, as two-plus years’ worth of weddings, travel, and other delayed celebrations collide within my calendar; thank you for bearing with the random scheduling.
My latest stories for Fortune, including the new cover story of our June/July Fortune 500 issue, are about skyrocketing CEO pay. It’s an important business topic that’s often difficult to cover with any sense of novelty, because it’s become such a möbius strip: Almost every year, CEO compensation hits a new record high. Cue public outrage from shareholders, corporate governance experts, worker advocates, policymakers, et al. The major business-media outlets, mine included, write stories about the eye-popping amounts of money Fortune 500 CEOs are making. And then … nothing changes. The next year, the cycle begins again. Or, as I wrote earlier this week for Fortune:
The grass is green, the sky is blue, and—despite decades of scrutiny—CEOs are still being paid way too much. Can anything rein in their skyrocketing compensation?
Many people are trying, including Abigail Disney, the filmmaker and wealthy descendant of Walt Disney. In 2019, she started publicly criticizing the “insane” compensation of Disney Co.’s then-CEO, Bob Iger, when he picked up a pay package valued at almost $66 million—1,424 times the median Disney employee’s salary of $46,127, and more than 2,000 times what its lowest-paid workers earned on an annual basis. (The company did not respond to my requests for comment.)
“Think of what the workers do at the bottom of the pile. If you’re going to give [the CEO] a big boost, you need to push some of that to your workers,” Abigail Disney told me. “Of course shareholder value matters—but while capital should be rewarded for risk and time and all the rest of that, so should work be.”
Still, as she acknowledges, it’s hard to completely ignore the “shareholder value” argument. When a public company is wildly successful and its stock goes up and up, those market returns help enrich all of its shareholders–including the pension funds and other institutional investors that control the retirement savings and wealth of many middle-income Americans, not just the one percent. That’s one reason companies and compensation experts often argue that a CEO deserves tens or sometimes even hundreds of millions of dollars every year: By generating so much wealth for so many people, hasn’t he (or, in the rare case, she) earned a big payday?
Well, not always! For our cover story, Fortune list editor Scott DeCarlo devised an ingenious new way of analyzing what CEOs are paid vs. how well their companies have performed on the stock market. Scott’s complex data-crunching involved endless rows in Excel spreadsheets and many, many numbers–but his results yielded a simple, brilliant, and devastating new list of the 10 Most Overpaid CEOs on the Fortune 500.
The dubious top honors went to Altice USA CEO Dexter Goei (No. 1) and Warner Bros. Discovery CEO David Zaslav (No. 2). Then there’s Amazon CEO Andrew Jassy–who only took office in July and thus wasn’t eligible for our “Most Overpaid” and “Most Undervalued” analysis, but who topped a related list. In 2021, Jassy had the highest CEO-to-median-worker pay ratio in the Fortune 500:
The retail Goliath, which has long faced complaints over working conditions in its massive warehouses, has been fiercely fighting unionization efforts at several facilities. Meanwhile, Amazon decided to award Jassy a 2021 pay package worth $213 million as granted—or 6,474 times the $32,855 median salary of Amazon’s employees.” [Amazon has said that the grant will vest over the next ten years and is “expected to represent most of Mr. Jassy’s compensation for the coming years.” A company spokesperson says that Jassy’s 2021 pay package and what it “equates to from an annual compensation perspective is competitive with that of CEOs at other large companies.”]
There are admittedly a lot of numbers and ratios and dollar figures in these articles, but the overarching point is simple: As record income inequality becomes a national emergency, can for-profit companies afford to keep so highly paying–and in some cases, overpaying–their top executives?
“I am a capitalist. I’m for improving capitalism, not throwing it out,” says Rosanna Landis Weaver, wage justice and executive pay program senior manager at As You Sow, a nonprofit shareholder-advocacy group.. “It’s in people’s self-interest to try to contain this—because the political instability that is created by income inequality is a real danger. It’s a danger to democracy, and it’s a danger to capitalism.”
Lady Bits
–Epilogue: No. 5 on our list of the Most Overpaid CEOs was James Loree, head of manufacturing company Stanley Black & Decker. Loree became CEO in August 2016 “and has since provided meager annualized returns of 1.5%,” we reported at the end of May.
When I informed Stanley Black & Decker about this article, well ahead of publication, a spokesperson declined to provide a comment. But less than a week after we published our list, the company said Loree would step down as CEO. Sometimes, it turns out, you can cut the CEO-pay möbius strip.
–Good Austen, bad Austen: I so enjoyed Fire Island’s funny, modern, unconventional-but-spiritually-faithful adaptation of Pride and Prejudice … as opposed to whatever Netflix is apparently trying to do with its upcoming “Persuasion, but make it, like, less of a bummer. And more slapstick!”
–Bias acknowledged: The 1995 Persuasion movie is melancholy, unglamorous, quietly but deeply romantic, and pretty perfect.
–Most laugh-out-loud corporate disaster of the week: “The incident bears striking similarities to a popular episode of ‘The Office’ sitcom.”
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