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Top Compensated CEO Rankings Criticized as “Too Much” with Top Spot at Over 500 Million USD

ZUU Online SG logo ZUU Online SG 11/10/2018 ZUU
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In 2017, the CEO of the US company with the highest board member compensation was Evan Spiegel, the CEO of Snap Inc. Spiegel, who is famous for “Snapchat”, earned 504 million USD. In the second and third places were Scott Nuttall and Joseph Y. Bae, both of whom are co-presidents of the major New York based investment company KKR, received over 200 million USD.

With the exception of CEO Elon Musk and CEO Sundar Pichai, the members of the top 10 have changed dramatically since 2016. Furthermore, the rankings of the two CEOs have been swapped.

The ranking shows the top 100 CEOs with high executive compensation based on data that was requested by Bloomberg from the US regulatory authorities on the US listed companies. The compensation data includes recent salaries, bonuses, benefits, stock options, restricted stocks, and changes in the value of retirement benefits.

Top 10 Highest Compensated US CEOs

10th Tony Ressler (Ares Management) 108 million USD

9th Henry Kravis (KKR & Co.) 112 million USD

8th George Roberts (KKR & Co.) 112 million USD

7th Stephen Schwarzman (Blackstone Group) 125 million USD

6th Rob Roy (Switch Inc.) 143 million USD

5th Sundar Pichai, (Alphabet Inc.) 144 million USD

4th Elon Musk (Tesla Inc.) 150 billion USD

3rd Joseph Bae (KKR & Co.) 213 million USD

2nd Scott Nuttall (KKR & Co.) 213 million USD

1st Evan Spiegel (Snap Inc.) 504 million USD

Is Spiegel’s Compensation Too High?

Spiegel, the co-founder of Snap Inc., listed his company on the stock market, which led to his high compensation. However, the question remains as to whether the performance of the company after the listings and the compensation he received are balanced.

Snap Inc., which was listed on the New York Stock Exchange on March 2, 2017, showed a strong start with stock prices rising to 44% on the first day. However, they declined to a peak value of 29.44 USD the following day.

According to results reported in May of the same year, it became clear that the sales amount did not reach its forecast and the number of users of Snapchat was decreasing (article from Recode.net, November 7, 2017). On July 10, 2017, it fell for the first time to a list price of 16.95 USD (article from CNBC, July 10, 2017).

After this, it was sued by former employees who alleged that the figures had been padded. The newly introduced design which was created to increase the number of users had the opposite effect and accelerated the rate at which users left the service. In May 2018, the stock fell to around 10.50 USD. Despite reports that “the collapse of the Snapchat bubble was near,” the price rose to the 13-dollar level as of July 3rd. However, it is a time of concern when it comes to the company’s future.

Taking these situations into consideration, people have criticized the high compensation being provided to Spiegel. Dan Marcec, a representative of the Equilar Business and Solutions Company, who conducted a similar survey, commented to the Financial Times that “it is very rare to see an award that large” (Article from Business Insider, February 23, 2018).

Four New Executives Enter the Top Ten from KKR & Co.

Four executives from KKR (Kohlberg Kravis Roberts) & Co. have entered the top ten, coming close to first place and taking the second and third spots. President Nuttall and President Bae were co-promoted to the position of president as the company made “preparations for a change of generation”. Co-founders and co-CEOs Roberts and Kravis ranked 8th and 9th respectively.

The four executives have been the company’s shareholders since 2010 when KKR & Co. was first listed. It seems that the compensations of President Nuttall and President Bae will depend on the stock price, which will need to exceed $40 for 10 consecutive days by the end of 2022.

CEO Musk’s Introduction of “Long-Term Performance Compensation System” and CEO Pichai’s Biennial Compensation

The annual salary of Elon Musk, the CEO of Tesla, is surprisingly low at roughly 37,000 USD, but his income in the form of bonuses and stock options is huge. In 2012, when purchasing 5,270,000 thousand shares of Tesla, he introduced a performance-based compensation system. In January 2018, the company announced that it would shift to a “long-term performance compensation system.” Musk’s CEOs are eligible for compensation only if they have increased the market capitalization from the current value of 600 billion USD to 650 billion USD in the next decade and further achieve revenue and profit targets. Depending on the outcome it is an opportunity to get billions of dollars of compensation, but also includes the risk of working for free for ten years.

CEO Pichai of Alphabet Inc. was awarded biennial compensation in the nine-digit range in 2016. This amount will be paid over four years.

Female CEOs Did Not Make the Top 10

Most CEOs who made the previous top ten rankings have been dropped this time around. Mark Rory, the CEO of Walmart Stores, who previously came in first with a total compensation of 236 million USD, Tim Cook, the CEO of Apple, who previously came in second with 150 million USD and John Weinberg, the CEO of Evercore Partners, who previously came in third with 123 million USD were all not on the list this time.

Furthermore, all CEOs who appeared in the most recent top 10 are male. CEO Virginia Rometty of International Business Machines took the tenth spot in the previous ranking, but a female CEO was unable to hit the top ten mark this time around. Oracle’s CEO Safra Catz, who earned 48.2 million USD in 2017, ranked 33rd and became the highest-earning female CEO.

It has been reported that CEOs of major US companies receive a “compensation of 100 to 300 times of that of general employees” and discussions regarding impartiality are constant. However, Jan Koors, the Senior Managing Director of the compensation consulting firm Pearl Meyer, says that “there aren’t a lot of people who can run global multibillion-dollar companies,” and that “if you can do that, you can make a lot of money” (article from Bloomberg, May 10, 2018).

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