This post originally appeared in the Packet Pushers’ Human Infrastructure newsletter. You can get the newsletter for free here. Or don’t. That’s fine too.
The tech sector has recently gone through a spasm of layoffs. Tens of thousands of jobs have been cut at companies such as Microsoft, Google, Cisco, and Salesforce. The cuts are needed, these companies say, because they are grappling with slower growth, fears of a recession, rising interest rates, and over-hiring during the pandemic.
One thing they aren’t grappling with is outsize compensation for chief executives. A recent report identifies the 100 most overpaid CEOs at publicly-traded US companies. I went through the report and found seven in the IT sector who are getting sky-high compensation, which include base salaries, stocks, and bonuses.
These pay packages look even higher when compared to the median pay of their workers. For instance, the ratio between Intel CEO Pat Gelsinger’s compensation and the median pay of an Intel employee is 1,711 to 1. I know Mr. Gelsinger has an aura of magic, but is he really delivering almost 2,000 times more value to Intel (and its shareholders) than a typical engineer or manager?
Here’s the highlights on tech CEOs I pulled from the report:
Source: “The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?” – As You Sow
What Makes A CEO Overpaid?
The report, which is produced by a non-profit called As You Sow, describes how it identifies and ranks overpaid CEOs. First, it uses research from an investment rating firm to gauge CEO pay against the company’s Total Shareholder Return (TSR), which is “total stock gains or losses, plus reinvested dividends.”
Second, it looks at shareholder votes against CEO pay packages based on voting data gathered from SEC forms. Third, it looks at CEO pay compared to the medium employee pay. Public companies in the US are required to report this figure in their annual proxy statements. You can download the report yourself (in exchange for contact details) for more details on their methodology and to see the full list.
What Does It Mean To Take Responsibility?
When a company lays off a significant number of employees, the playbook is to publish a blog post in which the CEO mourns the loss of “friends and families” and takes “full responsibility” for the decision.
But these posts never say how they’ll take responsibility. Perhaps one less ivory back scratcher?
Two chief executives have announced they’ll cut their own pay. Pat Gelsinger will take a 25% cut to his base salary of $1.25 million. The announcement came after Intel reported dismal corporate earnings, including a net loss of $466 million in the fourth quarter.
Gelsinger’s pay cut seems more performative than substantial. When you factor in stocks, which account for the majority of Gelsinger’s total compensation, the real cut comes to approximately 0.17%.
Eric Yuan, CEO of Zoom, will take a 98% cut and forgo a 2023 bonus after the company announced it was laying off about 15% of its workforce. The company had over-hired during the pandemic and then found itself overstaffed, leading to the layoffs. Said Yuan in an email to employees “As the CEO and founder of Zoom, I am accountable for these mistakes.”
Business Insider says that after the cut, Yuan will earn about $10,000 for the year. That seems more like a significant hit.
That’s two. What about all those other CEOs? How are they taking responsibility for the consequences of their decisions? And what about shareholders, particularly institutional investors that control large blocks of shares and could influence executive compensation? What about boards of directors? Responsibility without accountability isn’t really responsibility at all.
