Wall Street Gets the Flak, But
Tech CEOs Get Paid All the Money

Rightly or wrongly, Wall Street CEOs are still excoriated as greedy fat cats who exemplify everything that’s wrong with executive pay.

But look around corporate America these days, and you’ll find any number of executives, particularly in tech, taking home far more than those bankers ever made—even during the boom years before the financial crisis—without a fraction of the scrutiny or the outrage.

It’s a small price to pay, companies lavishing those lofty compensation packages say, as long as their stock prices keep going up.

No one embodies this better than Elon Musk, the space and electric-car titan who was the highest-paid executive in the U.S. for 2019 with $595.3 million, according to the Bloomberg Pay Index. The money stems from the pay deal he scored a couple of years ago: A promise of a haul in the tens of billions of dollars if Tesla Inc. became one of the world’s most valuable firms.

But as the coronavirus pandemic lays bare the country’s economic inequalities, critics again point out the reality obscured by the rebounding stock market: An economy that’s working extraordinarily well for some but less so for many others.

Highest Paid CEOs and Executives in 2019

“While excessive compensation might be most dangerous at Wall Street firms because of the systemic risk, sky-high pay throughout corporate America encourages many types of socially and environmentally damaging behavior,” said Sarah Anderson, who directs the Global Economy Project at the Institute for Policy Studies. “And in many sectors, like tech, I think it has largely gotten a pass.”

Apple Inc.’s Tim Cook ranks second, the index shows, mostly thanks to an equity grant he got in 2011. Tom Rutledge, the CEO of Charter Communications Inc., is third. Only one person from finance—Blackstone Group Inc. Chief Operating Officer Jonathan Gray—makes the top 10, with $107.6 million.

By contrast, the top-paid bank CEO was Wells Fargo & Co.’s Charlie Scharf, whose 2019 package was worth $55.2 million by the end of the year, according to the index.

To some, astronomical executive pay represents part of the fundamental lure of American capitalism: That great wealth is within reach for anyone who works hard enough.

To others, it’s a reminder of how inequitably the riches are shared—an imbalance that has become even more pronounced as millions of Americans, but few executives, have lost their jobs during the pandemic while stocks have soared.

Wages as a share of the U.S. economy are near their lowest level since the Federal Reserve began collecting such data in the 1940s. Meanwhile, the Economic Policy Institute estimates that CEO compensation has grown more than 900% over the past four decades, compared with just 12% for the typical worker.

That trend has been fueled by institutional shareholders, who since the 2008 crash have pushed companies to link pay with performance—most often judged by stock prices. It has effectively created an environment where almost no amount for a single individual is too large as long as the stock keeps going up.

Nowhere has this been more pronounced than in tech. Four of the top 10 on the Bloomberg Pay Index are tech executives: Cook, Alphabet Inc.’s Sundar Pichai, Microsoft Corp.’s Satya Nadella and Robert Swan of Intel Corp. (Cook has said he will donate most of his money to charity.)

The amounts rarely draw much attention. Alphabet’s announcement on a Friday afternoon in December that Pichai would collect about $240 million of stock awards in coming years yielded little more than a collective shrug. (The index annualizes his equity over three years, which puts his awarded pay for 2019 at $86.2 million.)

In their defense, some of these tech firms are among the world’s biggest in terms of market value—a measure that’s often used to justify executive pay. And unlike the banks, they’re not accused of bringing the financial system to the brink of collapse.

Highest Paid Women CEOs and Executives in 2019

The Bloomberg Pay Index tracks the 100 highest-paid executives at companies that submit compensation details to U.S. regulators. The figures on the index consist of salaries, bonuses and benefits doled out in the most recent year.

They also include the value of awarded stock options and restricted shares that may yield payoffs in the future. For comparison purposes, all such equity awards are valued at each company’s fiscal year-end, not the date they were granted. The index’s figures can therefore differ from those disclosed in filings—sometimes by a lot—depending on stock-price changes and dividends.

Diane Pelkey, a spokeswoman for online pet retailer Chewy Inc. whose CEO Sumit Singh is fifth on the index with $108.2 million, disputes Bloomberg’s calculation of his pay. Only about a quarter of his shares had vested at the end of 2019, she said in an email.

For Singh and every other executive, the index counts almost all annual grants of shares or options in the year they’re bestowed, not when they vest.

But any one-time grant meant to compensate an executive for several years is allocated over the life of the award, as explained in regulatory filings. Musk, for example, receives no compensation from Tesla Inc. aside from large grants of stock options tied to performance goals. The securities are meant to pay him for a decade. But in cases where the targets were met ahead of schedule and the options have vested, he has received new grants.

In 2018, he got his latest mega-grant of options, listed in filings with a value of $2.28 billion. The Bloomberg index allocates 1/10th of the securities to each of the next 10 years, and calculates the value of each year’s tranche based on the closing stock price on the last day of trading. His $595.3 million for last year includes a tranche of the 2018 grant and part of a similar but smaller award he received in 2012.

Like Musk, most executives on the index aren’t guaranteed to pocket all, or even most, of their packages. Stock awards, which make up the bulk of their pay, are often contingent on performance conditions, and payouts are usually reduced or eliminated if those aren’t met. On the other hand, if the goals are exceeded, the windfall could be significantly bigger than initially estimated.

Such is the case for Rutledge at Charter. In 2016, he received big grants of stock options and restricted shares that would be his if Charter’s share price exceeded certain thresholds over the coming years. In the meantime, he wouldn’t receive any additional equity, only his salary and bonus. (Instead of counting all options and shares in 2016, the index allocates 20% of the securities for each year in the five-year performance period.)

Back then, the company’s shares stood at around $224. The awards are tied to performance thresholds ranging from $289.76 on the low end to $564.04 on the high end, and his continued service as CEO.

Charter closed at $530.19 on Thursday in New York, having more than doubled over the past four years. So far, about half the options he got in 2016 have vested. If he exercised all of those in one fell swoop, he would take home more than $250 million before taxes.

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