Can you guess which company has a CEO pay ratio of more than 40,000 to 1? Here are a few hints:
You guessed it—the company is Tesla and the CEO is Elon Musk. The mega grant is intended to compensate Musk, who does not draw a salary from Tesla, for the next ten years—so Tesla’s CEO pay ratio for the next nine years should be 0 to 1. An outsized CEO pay ratio is one drawback of mega grants.
I was alerted to this interesting news item by a Bloomberg article that charts out all reported CEO pay ratios (the article is updated periodically as new ratios are reported). Below are a few other tidbits from the article.
The next highest CEO pay ratio behind Tesla’s (at least, so far) is Mattel, with a ratio of 3,401 to 1. Mattel notes that their ratio is high because of a one-time inducement grant to their new CEO. Without the inducement grant, the Mattel’s CEO pay ratio would have been 2,598 to 1, which is better but still higher than most companies (high enough that it would still fall in Bloomberg’s “outliers”).
Mattel is one of the few public companies to publish a supplemental ratio, as is allowed under the SEC’s rules. But I’m not sure a supplemental ratio of almost 2,600 to 1 makes anyone feel better about their CEO’s pay. Also, Mattel was in this same situation last year, when their CEO pay ratio was 4,987 to 1, also because of a one-time inducement grant for their new CEO (a different CEO than this year’s new CEO)—apparently, they are having trouble getting a CEO to stick around, despite their outsized inducement grants.
Another reason Mattel’s ratio is so high is that their median employee’s pay in 2019 is only $5,489. They voluntarily disclose that 82% of their employees are located outside the United States and most work in manufacturing, noting that the median employee works in their manufacturing facility in Indonesia.
Compared to Tesla and Mattel, Disney’s ratio, which drew highly publicized criticism from a Disney heir, was modest at 1,424 to 1 (but still well above the median).
The company at the median (i.e., the median of the CEO to median employee pay ratios) is ConocoPhillips, with a ratio of 143 to 1, which is about what their ratio was last year.
Three companies have ratio of 0 to 1: Square, Ubiquiti Networks, and Liberty Broadband. The CEOs of Square and Ubiquiti draw no compensation (either salary or equity awards) and haven’t for several years. In the case of Liberty Broadband, the CEO received a grant of a stock option for 1.5 million shares (about 5% of the company’s class A common stock at the time) in 2014 and also received grants of stock options and RSUs in 2019.
CEO Pay Ratio 2020: The Most Challenging Calculation to Date?
In a volatile market and economic climate, there is much to think about. Furloughs, reassessing equity award performance goals, award modifications, and participant morale are just some of ...Read More
CEO Pay Ratio Year 2: Investors Chime In
Last October I blogged about some of the considerations public companies are facing as we approach the second year of the CEO Pay Ratio proxy disclosure (“Read More
Smaller Reporting Companies Are Getting Larger
On June 28, the SEC released amendments to the definition of a “smaller reporting company” that signif...Read More
Learning From CEO Pay Ratio Disclosures
Perhaps one of the longest talked about topics in equity and executive compensation circles has been the anticipated CEO Pay Ratio disclosure. Eight years in the making (the disclosure was manda...Read More
How Does Your Pay Ratio Stack Up?
As companies prepare to publish their first CEO pay ratio, the million-dollar question is: “how will your ratio compare to everyone else’s?” The second million-dollar question ...Read More