How executive pay went galactic

{"text":[[{"start":null,"text":"

"}],[{"start":6.48,"text":"I am not alone in struggling to get my head around the idea of Elon Musk as the world’s first dollar trillionaire. “What does that mean and what’s that about?” wondered Pope Leo in a recent interview."}],[{"start":20.66,"text":"Last month, Tesla approved an extraordinary incentive plan, worth $1tn in shares to Musk if the mercurial chief executive meets stretching goals. If this is a landmark in executive pay, it seems fabulously remote."}],[{"start":39.21,"text":"To put it in terms Musk might appreciate, imagine that the distance from the centre of our Earth to its surface represents $1mn of executive pay. That threshold was probably crossed for the first time almost a century ago by Eugene Grace, president of Bethlehem Steel. His 1929 bonus of $1.6mn — a “phenomenal fact”, according to Time magazine — was uncovered, with exquisite timing, just as the Great Depression hit. By the 1980s the very highest paid were breaking the $10mn threshold: in 1988, for example, Disney executive Michael Eisner’s total package was worth $40mn."}],[{"start":93.1,"text":"You have to travel 384,000km, from Earth to the Moon, to reach a payout of $60mn. As a total package, that is now perfectly within reach for many US chief executives, if stock awards are included. In 2024, the co-CEOs of Netflix, Ted Sarandos and Greg Peters, received just over $60mn each for 2024 and many other US chief executives pulled in more."}],[{"start":126.38,"text":"At $56bn, the Tesla boss’s 2018 stock option package, struck down by a Delaware judge in early 2024, rocketed past Musk’s favourite interplanetary destination of Mars, to somewhere in the asteroid belt between the red planet and Jupiter. His trillion-dollar payout floats beyond Neptune, about 17,000 times the distance of a mere moonshot."}],[{"start":156.07999999999998,"text":"Julia Hoggett, chief executive of the London Stock Exchange, said last week she approved of the recent more “forceful” stance taken by UK company boards in offering higher rewards to lure in international executives. But she added: “I’m not talking about Elon Musk-style pay packages; we’re talking about being able to attract and make sure that we can win in the war for talent.” "}],[{"start":183.05999999999997,"text":"Yet dismissing Musk and his incentive plan as science fiction and moving on misses two important points. "}],[{"start":191.28999999999996,"text":"First, since the 1920s, the war for talent has been waged by executives aggressively benchmarking themselves against the pay of their peers, based on the erroneous idea that everyone can earn above-average rewards. The gravitational pull of Musk’s trillion dollars, whether or not he receives them, is bound to be felt by avaricious CEOs bringing home “only” eight or nine figures. It could drag all executive pay inexorably skywards."}],[{"start":222.21999999999997,"text":"Second, the Musk package blows apart the oft-cited ratio between chief executive pay and workers’ average earnings. It held steady between the 1940s and the 1970s — it was 20 to 1 in 1965, for instance — before really taking off in the 1990s. US CEO pay is now more than 200 times employee earnings, or more than 600 to 1 at companies paying the lowest wages. As Pope Leo remarked, the “continuously wider gap between the income levels of the working class and the money that the wealthiest receive” is a significant factor in the polarisation of society."}],[{"start":267.61999999999995,"text":"It is probably about as easy for Musk to make his $1tn as it would be for him to travel to the chilly outer reaches of our solar system. Tesla’s valuation would have to expand sixfold to $8.5tn. A few observers have remarked that means the package is simply a supersized pay-for-performance plan. Shareholders, too, would be vastly enriched if Musk were to hit his goals."}],[{"start":299.5199999999999,"text":"But the disquiet — also expressed by institutional investors — is not for nothing. Norway’s sovereign wealth fund voted against Musk’s package adding, with Nordic understatement, “we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk”. "}],[{"start":321.61999999999995,"text":"That is the real reason Musk’s rewards are harder to digest than other huge jumps in CEO pay. The plan is so far outside most workers’ orbit that it severs the last tenuous link between executive remuneration and earthbound wages."}],[{"start":341.75999999999993,"text":"The politics of envy are generally fruitless, but here I agree with the pontiff: if becoming a trillionaire is “the only thing that has value anymore, then we’re in big trouble”."}],[{"start":362.23999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1764921461_1198.mp3"}