10 top CEOs who earn salaries of less than $50,000

Taking only $1 in compensation has become something of a point of pride in Silicon Valley.”The dollar salary really for them is meant to signify that they have large stakes in their company. The value they’re going to receive — the compensation they’ll earn — is coming solely from their stock,” Aaron Boyd, director of governance for Equilar, a company that researches executive compensation, explains to Forbes.”

You’re not going to question whether or not Larry Page is interested in growing a company’s stock as a shareholder. As one of the largest shareholders, he’s all in.”

Source: 10 top CEOs who earn salaries of less than $50,000

Bloomberg Pay Index: Highest-Paid Executives for 2016

In a year when technology leaders again seized the top spots among America’s highest-paid executives, a scion of Goldman Sachs Group Inc. stood out.John S. Weinberg, 60, whose surname had been synonymous with the bank for decades, left as co-vice chairman in 2015. A year later he joined Evercore Partners Inc., reaping sign-on awards worth $124 million as of Dec. 31. That placed him third on the Bloomberg Pay Index, a ranking of the best-compensated U.S. executives for 2016.

He joins an exclusive club increasingly dominated by bosses at companies that are, at best, just a few decades old. He’s surpassed only by Jet.com Inc. co-founder Marc Lore, whose $236.9 million in awarded compensation last year was largely composed of money Wal-Mart Stores Inc. paid to buy his company, and Apple Inc. Chief Executive Officer Tim Cook, who received $150 million. Google CEO Sundar Pichai, 44, and Tesla Inc.’s Elon Musk, 45, round out the top five.

Source: Bloomberg Pay Index: Highest-Paid Executives for 2016

Are Fund Managers Pushing Back on CEO Pay?

Financial Times notes:

[T]here are tangible signs that a growing number of investors are taking action to rein in excessive pay for company bosses. The consensus is that pressure from the public, politicians and clients have combined to put pressure on the investment industry to prove it is willing to push back on egregious pay packages.

Graeme Griffiths, a director at Principles for Responsible Investment, a UN­backed organisation whose members oversee a collective $62tn of assets, says: “Society is calling on fund managers to be more engaged. The public is now more aware of [wealth inequalities] than they were before.

“There has been a lot of academic research, news coverage and changes in the political landscape that have increased scrutiny of the differentials between those in well [paid] positions in the corporate arena versus those in more typical jobs. [Asset managers] are certainly partly responsible for this divergence over a long period of time.”

BlackRock, which was urged to toughen its voting approachurged to toughen its voting approach after approving 97 per cent of US pay resolutions in the 12 months to the end of June 2015, this year urged the CEOs of the UK’s largest companies to ensure salary increases for executives did not outpace those for average workers.

The world’s largest asset manager was also slightly less lenient on pay in the US last year, approving 96 per cent of remuneration reports in the 12 months to the end of June 2016, according to figures compiled for the FT by Proxy Insight, the data provider.

BlackRock chief executive Larry Fink additionally wroteLarry Fink additionally wrote to the heads of large global companies this year warning them that BlackRock would not “hesitate to exercise our right to vote against . . . misaligned executive compensation”.

Elizabeth Holmes owes Theranos $25 million – MarketWatch

VEA Vice Chair Nell Minow is quoted in this story about Theranos’s loan to founder Elizabeth Holmes to exercise her stock options.

“It subverts the entire premise of an option grant,” said Nell Minow, vice chair of ValueEdge Advisors, a corporate governance consulting firm, who said such grants are traditionally meant to encourage executives to produce results for their shareholders. The deal between Theranos and Ms. Holmes means “any downside is someone else’s risk,” Minow said.

Source: Elizabeth Holmes owes Theranos $25 million – MarketWatch

Ralph Lauren – CEO Pay Updates: 2017 Proxy Season

At As You Sow, Rosanna Weaver writes about pay for the eponymous Ralph Lauren:

While once common, employment agreements with excessive guarantees have grown rarer. Many shareholders vote against pay when packages are of even three years. On March 31, 2017, the board of Ralph Lauren signed an agreement with Ralph Lauren that will last for five years, through April 2, 2022. “His annual base salary will continue to be $1.75 million, and he will continue to have a target bonus opportunity in the amount of $6 million for each fiscal year.” These are extraordinarily generous guarantees, particularly given that the company also pays for a CEO.

However, the most alarming things in the agreement is what happens if Lauren – who is currently 77 years old — leaves employment for any reason, including disability. In terms of salary and bonus, the treatment is routine, though still generous. Much more problematic is treatment of unvested restricted performance share units (“RPSUs”) and PSUs which “will vest at target in their entirety on the date of his termination of employment.” Similar vesting will occur if the company fails to extend the contract after in 2022.

Source: Ralph Lauren – CEO Pay Updates: 2017 Proxy Season

Wells Fargo – CEO Pay Updates: 2017 Proxy Season

“For many years to come, Wells Fargo will be held up as an example of impacts of poorly designed incentive plans and the very real impacts of reputational damage,” Rosanna Landis Weaver says in an analysis of compansation at Wells Fargo.

Despite promises to reduce pay following last year’s revelation of fraudulent account leading to the departure of the CEO and the payment of $185 million in fines, Weaver notes,

Wells Fargo still has extraordinarily high executive compensation. The actions taken do not go far enough to restore investor trust. President and CEO Timothy Sloan’s pay package grew 17% from last year to $13 million. Sloan did not receive a bonus this year, but the value of his stock award increased from $8 million to $10.5 million. The increase is more than double the $1 million non-equity incentive compensation award he received last year.

It is true that if the company fails to meet performance criteria those performance shares may be worth less than estimated, but they may also be worth more. The footnotes on the summary compensation table note that at the 150% of target award Sloan would receive 327,444 performance shares with a current value of $15,750,056.

In addition, Sloan has a hefty salary. In March of 2016, when he was promoted to president, Sloan’s salary was increased from $2 million to $2.4 million. As we noted in our analysis then, this was not only extremely high for a president of a company but was higher than that of the vast majority of CEOs of similarly sized companies.

Source: Wells Fargo – CEO Pay Updates: 2017 Proxy Season

A Loophole Helps Johnson Controls Hide Millions in CEO Pay

Theo Francis reports that CEO Alex Molaniroli was able to hide eleven months of his pay due to a merger with Tyco International. VEA Vice Chair Nell Minow commented:

But some say that doesn’t justify giving incomplete pay figures, and leaving investors unsure how much has been omitted. “The immediate question is, what are you trying to hide, and why are you trying to hide it?” said Nell Minow, a longtime corporate-governance advocate.

The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel? New Webinar and Report from As You Sow

The 100 Most Overpaid CEOs: Are Fund Managers Asleep at The Wheel? from As You Sow on Vimeo.

From the report, which can be downloaded here:

According to the Economic Policy Institute, “CEO pay grew an astounding 943% over the past 37 years, greatly outpacing the growth in the cost of living, the productivity of the economy, and the stock market, disproving the claim that the growth in CEO pay reflects the ‘performance’ of the company, the value of its stock, or the ability of the CEO to do anything but disproportionately raise the amount of his pay.”

For the past two years we have highlighted the 100 most overpaid CEOs of S&P 500 companies, and the votes of large shareholders, including mutual funds and pension funds on their pay packages.

What has changed since the first report? Not much. Executive pay has continued to increase. Although mutual funds and pension funds are doing better at exercising their fiduciary responsibility by more frequently voting their proxies against some of the most outrageous CEO pay packages. Of the mutual funds with the largest changes in voting habits from last year, all of them opposed more of the pay packages than they had the prior year.

As we noted in our prior reports, the system in place to govern corporations has failed in the area of executive compensation. Like all the best governance systems, corporate governance relies on a balance of power. That system envisions directors representing shareholders and guarding the company’s assets from waste. It also envisions shareholders

This governance system comes from a time when it was assumed that unhappy investors would simply sell their stakes if sufficiently dissatisfied with the governance of a company. It reflects a time when there were fewer intermediaries between beneficial holders and corporate executives. However, today more and more investors own shares through mutual funds, often investing in S&P 500 index funds. Individual investors are not in a position to sell their stakes in a specific company. The funds themselves are subject to a number of conflicts of interest and to what economists refer to with the oxymoronic-sounding term “rational apathy,” to reflect the expense of oversight in comparison to a pro rata share of any benefits.

The pay packages analyzed in this report belong to the CEOs of companies that the majority of retirement funds are invested in.

Today, those casting the votes on the behalf of shareholders frequently do not represent the shareholders’ interests.

CEO compensation as it is currently structured does not work; rather than incentivize sustainable company growth, compensation plans increase disproportionately by every measure. Too often CEOs are rewarded for mergers and acquisitions instead of improving company performance. As noted in the Financial Crisis Inquiry Report, “Those [compensation] systems encouraged the big bet – where the payoff on the upside could be huge and the downside [for the individual executive] limited. This was the case up and down the line – from the corporate boardroom to the mortgage broker on the street.”2 We note that the downside, which could include such features as environmental costs, may be limited for the individual, and instead borne by the larger society.

Paying one individual EXCESSIVE amounts of money can lead people to make the false assumption that such compensation is justified and earned. It undermines essential premises of capitalism: the robust ‘invisible hand’ of the market as well as the confidence of those who entrust capital to third parties. Confusing disclosure coupled with inappropriate comparisons are then used to justify similar packages elsewhere. These systems perpetuate and exaggerate the destabilizing effects of income inequality, and may contribute to the stagnating pay of frontline employees.

As the report is now in its third year, we have the ability to look back and see what happened to the companies identified in our report two years ago. We’ve been saying the most overpaid CEOs under-deliver for shareholders. In examining this data from the following two years of our report, we have found dramatic results— not only does the group of 100 most overpaid CEO companies of the S&P 500 underperform the S&P 500 by 2.9 percentage points, but the firms with the 10 most overpaid CEOs underperformed the S&P 500 index by an amazing 10.5 percentage points and actually had a negative return, reducing the actual value of the companies’ shares by 5.7 percent. In summary, the firms with the most overpaid CEO’s devastated shareholder value since our first report published in February 2015.

Identifying the 100 most overpaid CEOs in the S&P 500 was our purpose in writing this report. In undertaking this project we focused not just on absolute dollars, but also on the practices we believe to have contributed to bloated compensation packages.

Shareholders now supposedly have the right, since the enactment of the Dodd-Frank financial reform act, to cast an advisory vote on compensation packages. However, in today’s world, most shareholders have their shares held and voted by a financial intermediary. This means that this critical responsibility is in the hands of a fiduciary at a mutual fund, an ETF, a pension fund, a financial manager, or people whose full time job is to analyze the activities of the companies they invest in and monitor the performance of their boards, their CEOs, and their compensation.

A key element of the report has been to analyze how mutual funds and pension funds voted on these pay packages. This year we vastly expanded the list of funds we looked at. In response to excessive and problematic CEO pay packages, it should be noted that every fund manager has the power to vote against these compensation plans and withhold votes for the members of the board’s compensation committee who created and approved them. In some cases, institutional investors should request meetings with members of the compensation committees to express their concerns. Institutional investors should be prepared to explain their votes on executive pay to their customers, and individuals should hold their mutual funds accountable for such decisions by expressing their displeasure directly to those that are also well compensated to protect and represent them.

 

 

 

Funds ‘Rubber-Stamp’ CEO Pay Slightly Less Often: Report | Bloomberg BNA

Shareholder activism and public pressure around executive compensation may be having an effect on how mutual funds vote on pay packages at companies they invest in.Mutual fund giants such as BlackRock Inc. and Vanguard Group have been called out by shareholder advocates in the past for “rubber-stamping” pay plans, but research from As You Sow shows they are voting against compensation deemed excessive a bit more often.The shareholder advocacy group came up with a list of 100 chief executive officers in the S&P 500 whose pay it considered too high based on financial performance and other factors. It then looked at voting records across 25 mutual fund families and found that average support for “overpaid” CEOs has declined somewhat, from 82 percent to 76 percent, over the past year.

Source: Funds ‘Rubber-Stamp’ CEO Pay Slightly Less Often: Report | Bloomberg BNA

Are Fund Managers Asleep at the Wheel? Which Funds Enable Excessive Pay?

Excessive executive compensation is a core contributor to America’s extreme and growing income inequality. CEOs have come to be grossly overpaid, and that overpayment is bad for the companies, the shareholders, the customers, and the other employees. The 100 Most Overpaid CEOs 2017, the third in a series from As You Sow, is designed to provide investors an overview of companies that overpay their CEOs, and a look at which pension and mutual funds too often vote to approve pay. The webinar, featuring report author Rosanna Landis Weaver of As You Sow and other leading compensation experts, will present the report findings and offer attendees the opportunity to pose questions to the panelists.

Register here.