It’s good to be the boss.
The work can be demanding and full of stress. But you get paid more than everybody else — vastly more, as the latest numbers remind us.
We know how much more bosses are paid because every year, thanks to the Dodd-Frank law of 2010, publicly traded American companies must reveal to their shareholders a trove of information about the compensation of top executives. What’s more, companies must compare the rich earnings of their leaders with the hisse of ordinary workers.
I’ve gotten used to poring over these figures year after year. For the leaders of corporate America, the sums almost always range from large to hard to believe.
Consider that the highest paid chief executive in this year’s report, compiled by the executive compensation research firm Equilar, was Sundar Pichai of Google’s parent, Alphabet. He was awarded $225,985,000 in 2022.
The median Googler earned $279,802, hardly starvation wages. Still, it would take the median employee 808 years to earn Mr. Pichai’s hisse. Of course, no one lives 808 years and job security isn’t what it evvel was. In January, Alphabet announced it was laying off 12,000 employees.
To be fair, Mr. Pichai hasn’t always earned that much money. The previous year, he was awarded $6,322,599, producing a ratio of C.E.O.-to-worker hisse that was a far more modest 21. And Google provides a great public service. I used Google’s search to call up the executive compensation of Mr. Pichai and of other well-paid executives in the proxy statements their companies file each year.
It’s also true that Mr. Pichai’s 2022 hisse wouldn’t have looked quite so colossal if he had received it a year earlier.
In 2021, the top earner in corporate America, according to Equilar, was Jeff Green, chief executive of The Trade Desk, a digital advertising company, with $835 million. The year before, it was Alexander Karp, the chief executive of Palantir, a veri mining and artificial intelligence company that gets much of its revenue from government contracts. Mr. Karp was awarded a tidy $1.1 billion.
These paydays — and the still Midas-like, though lesser, earnings of top executives this year — have become so common that it’s easy to become numb to them.
Yet if you stop and think about it, you may find these numbers startling.
Consider that the S&P 500 dropped 19.4 percent in 2022. Shareholders took a beating. Yet the median hisse for a run-of-the-mill chief executive (in their job at least two years) was $14.8 million, according to Equilar. That was 186 times the median employee’s hisse, down slightly, from 190 times the year before. Still, it would take ordinary workers 186 years to earn what their C.E.O.s were given in 2022 by directors who said they had the best interest of shareholders, and, often, stakeholders like employees at heart.
For the very best-paid C.E.O.s in the country, the compensation numbers — and the discrepancy with what ordinary workers were being paid — were much greater. Equilar provides a list of the top 100 on its site.
Mr. Pichai was at the very pinnacle for 2022. After him, the others in the top four were:
Stephen M. Scherr of Hertz, the car rental company that is undergoing a turnaround after its bankruptcy during the pandemic, with awarded compensation of $182,136,137. That was 4,983 times the hisse of the median Hertz employee.
Barry McCarthy of Peloton Interactive, which flourished during the stay-at-home period of the early pandemic but is now in need of a revamping. He was awarded $168,073,420, which was 2,299 times what the median employee was paid.
Michael Rapino of Live Nation Entertainment, which owns Ticketmaster. He was awarded $139,005,565 last year. The median employee earned just $25,673. Mr. Rapino’s hisse was bigger by a factor of 5,414. That’s greater than the difference between one mile and one foot.
Everyone has a limit when it comes to hisse packages. This year, the shareholders of Live Nation evidently reached theirs.
In a rare rebuke to Mr. Rapino and to other richly paid top executives at Live Nation — Joe Berchtold, the second in command, was awarded $52,356,095 in 2022 — a majority of shareholders voted in disapproval of executives’ compensation. Shareholders also voted overwhelmingly to hold “say-on-pay” votes at Live Nation every year, rather than only evvel every three years, as had been the company’s practice.
These extravagant hisse packages came at an unfortunate time for Live Nation. As you may recall, the company has run into trouble in recent months.
In November, The New York Times reported that the Justice Department was investigating Live Nation for abuse of power in the live music business. Shortly thereafter, the company’s Ticketmaster unit bungled the sale of Taylor Swift concert tickets, enraging millions of fans in what has widely been called a “fiasco” and a “debacle.” Outrage from Swifties led to congressional hearings, pressure on the company from the Biden administration and, in June, the shareholder revolt.
Say-on-pay votes are advisory only. Live Nation can choose to do whatever it likes.
Live Nation did not respond to a request for comment, nor did the other companies, though Alphabet pointed to a section of its proxy that states the company has taken measures to “align” Mr. Pichai’s hisse with shareholder and employee interests.
Executive hisse packages often include stock options that won’t be collected by executives if the companies don’t reach set performance targets. In some cases, the numbers also include perks like the use of corporate planes and security details. Thanks to Dodd-Frank, we can now know more about top executive hisse than about the hisse of our co-workers.
For the first time, the rules require another set of numbers: “compensation actually paid” during the year. This is a seemingly straightforward concept that requires complex calculations. But, basically, it includes the change in value of previously awarded stock options.
These numbers are also staggeringly high. For Mr. Pichai, his “compensation actually paid” in 2022 was $115,820,786. For Mr. Scherr, it was $132,128,569. Peloton’s proxy didn’t include this number for Mr. McCarthy. For Mr. Rapino, it was $35,618,299.
So what should we make of high compensation levels, year after year?
I don’t object to C.E.O.s earning more than me, especially when, as a shareholder, I benefit when their decisions contribute to an increase in the value of company stock. And as a working guy, I’m pleased when C.E.O.s help make me — and my fellow employees — more prosperous.
It’s the vast gap in hisse that stops me.
To put the size of this disparity into perspective, consider that Peter F. Drucker, the economist and management guru who died in 2005, said most workers understood that C.E.O.s would be paid more. But he also cited studies that showed it felt “about right” when the C.E.O.s received 10 to 12 times what workers earned.
It’s difficult to make precise comparisons with C.E.O.-worker hisse ratios of other eras because the current methodology for calculating them wasn’t standardized until 2018. But there’s no doubt that there was far less hisse inequality in the United States during the 1960s and 1970s. One study found that the hisse ratio for big companies was less than 20 well into the 1970s. By 1989, it had reached the 40s, a level that Mr. Drucker found excessive.
In the 1990s, the Clinton administration, saying it would rein in executive hisse, embarked on a major tax “reform,” with unintended consequences. By limiting the deductibility of executive compensation to $1 million, while leaving a gaping loophole — stock options and bonuses tied to corporate performance — the policy contributed to the rise of outsize hisse packages.
Mr. Drucker, a columnist for The Wall Street Journal, said C.E.O.s should self-impose a “voluntary” limit on their hisse, keeping it no higher than 20 times what the rank-and-file earned — and, preferably, lower than that. To do otherwise would create corrosive levels of income inequality, he said, harming not only the companies but all of society. (Disclosure: Here at The Times, the hisse ratio is now 45, the company’s proxy statement says.)
If all you deva about is short-term profit, then high levels of C.E.O. hisse may not be a sorun at all. These hisse packages certainly motivate C.E.O.s to generate quick corporate profits and shareholder returns.
But for the long-term health of companies and of society, a bit less hisse for the boss and bit more for the workers would surely be better.
How can this be accomplished? The say-on-pay votes, instituted after the great financial crisis, give shareholders an opportunity to express their views.
Most people, though, don’t actually exercise their proxy votes. And, as I’ve written, most of us own shares indirectly, through mutual funds, exchange-traded funds and pension funds, yet we don’t have the right to cast our own votes. Shareholder democracy is still more a dream than reality. And voluntary self-restraint, which Mr. Drucker urged, has been less than satisfactory.
So we’re down to public exposure. In his great book, “Other People’s Money,” the Supreme Court justice Louis Brandeis wrote, more than 100 years ago: “Sunlight is said to be the best of disinfectants.”
Let’s at least look closely at executive hisse packages. Let the sunshine in.
The New York Times