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CEO Pay

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The Commie rag The Guardian was complaining (as they always do) that a CEO gets paid a lot of money. This time they were complaining that Tim Cook gets paid $99M for record breaking profits (the company is now worth $3 trillion).

In the HackerNews comments people were complaining, so I wrote this:

His total remuneration package was worth $98.7m in 2021, compared with $14.8m a year earlier. Cook’s pay was 1,447 times that of the average Apple employee, according to a filing disclosed in January.

So what's the argument here, that he should be paid less, or that the average employee should be paid more? One would expect the CEO always get paid more than the average employee, a large difference does not mean inequity. For example, if you are the CEO of a supermarket, where employees are paid just above minimum wage on average, the CEO would likely be getting much more.

In January, it briefly became the first company to be valued at $3tn, it became the first $1tn company in 2018.

Last year, Cook took home $3m in salary, and received $82.3m in stock awards, $12m for hitting targets, and another $1.4m for air travel, retirement plan contributions, insurance premiums and other contributions.

Sounds like excellent value for money. The stock awards mean the better the job he does, the better his payout. They also come with strings attached (as Elon Musk learned when trying to cash-out). They also have other strings, for example with John Schnatter, who I believe was forced to sell off a majority share in the company he built [1]:

In addition to preventing him from accessing information, the corporation also implemented a "poison pill" strategy in order to limit Schnatter's chances of buying back a majority stake in the company.

[1][https://en.wikipedia.org/wiki/John_Schnatter](https://en.wikipedia.org/wiki/John_Schnatter)

As I said, I'm not a fan of Tim Cook or Apple, but you cannot argue with his success. He is excellent value for money - if he demanded more, Apple would have to pay it.

Elon Musk has been rushing to sell his shares, to convert 10% of his holdings into liquid cash. Apparently it was because of a 'meme', but in actual fact he needs to create liquidity to potentially bail-out SpaceX as the pandemic has severely limited launches - almost all of them so far have been for StarLink, which will take quite a while to return profits. Anyway, now is currently the best time to cash-out.

Problem is, Elon Musk is then subject to some stock rules and potentially crashing his own stocks due to surplus availability. He's in a race against the clock to get out as much as possible into other diverse holdings before the US dollar completely crashes entirely.

John Schnatter got absolutely screwed out of the company he built with his own hands. The board were simply looking for a reason to get rid of him, probably due to his values of quality over profit. This man loves pizza, he has a deep passion for it (evidenced by the fact he still samples and critique the product regularly).

The reason for getting rid of him is because he referenced the word 'nigger' 1 during an employee training session, to clarify an example of an unacceptable phrase to use. The important point here is context. He was not using it in a derogatory context, therefore it was not racist.

That whole situation annoys the living hell out of me. The idea of having words that cannot be said is a little like Harry Potter and "he who shall not be named" - it's a joke. These people will rip apart the dictionary until even something as mundane as the word 'woman' has no proper definition.

One of the commenters replied with:

For example, if you are the CEO of a supermarket, where employees are paid just above minimum wage on average, the CEO would likely be getting much more.

"Ideally" - if the company can only afford to pay employees minimum wage, the CEO would also be paid lower.

Unfortunately the world is not that simple.

I then spent some time and worked out the case for the Tesco CEO as an example I could remember that The Guardian also raised in 2020:

In 2021 Tescos employs 367,321 people [1] with a revenue of $75.022B (~£55B) [2]. Assuming employees are paid £8.91 an hour [3] for about 30 hours a week, for 52 weeks, is ~£5.1 in wages alone. ~10% of their revenue (at least) is spent on wages alone. A significant proportion of the remaining ~90% revenue will be spent on produce, transport, stores and other operational costs.

In 2020, Tesco chief executive Davis Lewis was paid £6.42m [4], which the article points out "is 355 times that of the lowest-paid average employee". If we take £3m away from him and 'share the wealth', the other 367,320 employees get a bonus of £8.17 per year, or an extra half-penny per hour.

So, you have £3m to spend to increase company turnover - do you give each of the low invested interest employees a half-penny for their efforts, or do you give the chief executive manager £3m and motivate him to increase profits?

It sucks, but it really seems obvious where the money has to be spent. I imagine the situation with Apple to not be much more different.

[1][https://www.macrotrends.net/stocks/charts/TSCDY/tesco/number...](https://www.macrotrends.net/stocks/charts/TSCDY/tesco/number-of-employees)

[2][https://www.macrotrends.net/stocks/charts/TSCDY/tesco/revenu...](https://www.macrotrends.net/stocks/charts/TSCDY/tesco/revenue)

[3][https://www.gov.uk/government/publications/minimum-wage-rate...](https://www.gov.uk/government/publications/minimum-wage-rates-for-2022)

[4][https://www.theguardian.com/business/2020/may/13/tesco-chief...](https://www.theguardian.com/business/2020/may/13/tesco-chief-executive-handed-642m-pay-package-dave-lewis)

I knew the case for a pay-increase for employees would be bad - I just didn't realise how bad it would actually be.

A few lessons here:

  1. You can get a much higher return on investment by concentrating on an individual rather than applying the investment diversely.
  2. Most people who complain about other people getting large sums of money do so out of jealousy rather than really thinking things through. I'm sorry you're not rich, but neither am I.
  3. The Guardian is, and always will be, not better than toilet paper. Don't wipe too hard though, the ink may transfer onto your arse and make a good impression.

  1. I will not censor myself here, no topic is above discussion and no idea is off the table.