• jordancrahan

How Much Does Your CEO Make?

Updated: Apr 30, 2020



THE SOURCE


The American Federation of Labor & Congress of Industrial Organizations (AFL-CIO) keeps an ongoing record of CEO compensation by company and compares it to the average compensation of that CEO's own employees.


OUR COMMENTARY


There is a lot to unpack with a tool like this but it provides critical transparency for anyone who works for or invests in any company on the list. You can sort by stock index, year, and total pay. There are thousands of records on the site but we pulled a couple different scenarios that we thought were interesting.


Scenario 1: The "Top 20"


For this example we sorted the S&P 500 by year for 2019 and took the first 20 entries the site gave us. The two with the largest gap from this random sample of 20? Dollar Tree where the CEO makes 835 times the amount of an average worker and Dollar General where teh CEO makes 770 times the amount of an average worker. This provides a poignant reminder that it isn't just about how much a CEO gets paid, it's about ahow much the average worker makes. Other companies in the "top 20" had CEOs who made WAY more money but those companies also had a higher average wage for everyone else. The average of all twenty companies in the group was a CEO who made 324.4 times the amount of the average employee. This is still a HUGE pay discrepancy that is completely unacceptable but after seeing that 835 this somehow doesn't seem as bad as it should.


Scenario 2: FAANG


FAANG is the market acronym for Facebook, Amazon, Apple, Netflix, and Google. These new era tech companies are frequently tracked alongside each other given their enormous market capitalization. For this one we had to use 2018 data because when we did the specialty searches 2019 data wouldn't populate.


Facebook's Mark Zuckerberg earned 99 times more than the average Facebook employee.

Amazon's Jeff Bezos earned 58 times more than the average Amazon employee.

Apple's Tim Cook earned 283 times more than the average Apple employee.

Netflix's Reed Hasting earned 178 times more than the average Netflix employee.


Google's listing had some issues because whil Sundar Pichai is the CEO of Google and Alphabet founder Larry Page was listed. His pay was listed at $1, which raises another interesting note about CEO pay that we think you need to be aware of. CEO stock options and other perks can make reporting total compensation quite complicated. While the Dodd-Frank act requires the tracking and disclosure of executive compensation that doesn't mean its always easy to find.


Scenario 3: Looking for the BIG numbers


For this last scenario we opened it up to the entire Russell 3000 for the calendar year 2018 because we wanted to find the largest CEO compensation packages we could. So here we go!


Tesla's Elon Musk made 40,668 times the amount of the average Tesla employee for a total compensation package of $2,284,044,884. His contract is virtually all tied up in performance incentives more so than most executives. While the extreme nature of his contract is certainly not typical, given how well Tesla performed last year it resulted in an astronomical pay gap that puts him in the number one spot by a wide margin.


The CEO of Axon Enterprise, maker of technology and weapons for law enforcement and civilian use, Patrick Smith was next on the list. His 2018 compensation package that made him 2,585 times the amount of the average employee. His compensation plan included only $70,000 in salary, but an incredible $245,953,429 in awarded options.


David Zaslav of Discovery Inc. (yes the media company with the TV channel) rounds out the top 3 with a total compensation package worth $129,499,005. In 2018 he made 1,511 times more than the average employee.


WHAT YOU CAN DO


  • Check your own investments to see what type of pay gaps are in your portfolio. The link at the top of this page is a good place to start.

  • Leverage your power as a shareholder. If you own stock in a company with an unacceptable pay gap look to leverage it during annual shareholder voting. You'll need widespread support from other shareholders to make lasting change but even something as simple as raising awareness of something you think is unacceptable is an important thing to do.

  • Stop spending money with companies who don't pay their employees fairly. This is the simplest one of all. Don't like how much someone makes? Spend your money elsewhere.



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