The New York Times and Equilar recently published a study of the 200 highest-paid CEOs of publicly traded companies. Twenty-two executives from the tech industry made the list, including leaders from hardware and software vendors, telco and cable companies, and Web giants.
As you might expect, it pays to be a CEO. Microsoft’s Satya Nadella is the highest-paid tech executive on the list (and number 4 overall) with total compensation of $84.3 million. At bottom of the tech pile (175th overall) is David DeWalt of FireEye, who took home $13.5 million.
There’s a big gap between these executives: Nadella earns approximately 6.2 times more than DeWalt.
But before you feel bad for Mr. DeWalt, consider the size of the gap between tech CEOs on this list and run-of-the-mill employees: up to 190 times the median salary of an IT employee.
Here’s how I got my figures.
HP CEO Meg Whitman is 11th on the list of 22 tech CEOs on this list, so I used her as the median. Then I compared her total compensation to the median compensation of IT employees from InformationWeek’s 2014 US IT Salary Survey (registration required).
Median total compensation for IT staff that work for IT vendors is $110,000. That’s 178 times less than the median payday for the tech CEOs on this list.
The gap is even bigger if you look at IT staff that work in telecommunications/ISPs. Total median compensation here $103,000, which is 190 times less than the median for these executives.
Are tech executives really 190 times more productive than their employees? Do they really bring almost 200 times as much value to the organization as the average worker?
Merit Or Mechanisms?
I realize this isn’t a perfect comparison, given that I’m working with a small sample size of CEOs who are at the very top of the earnings pyramid rather than a broad spectrum of executives.
Even so, I think it’s fair to point out the incredible disparity that exits between leaders and employees.
There’s a notion that’s taken hold in our culture that high-flying executives are the corporate equivalent of renowned athletes or Hollywood stars: possessed of unique abilities that simply can’t be found anywhere else.
The argument goes that these executives are one-of-a-kind visionaries with rare talents and skillsets. Outlandish compensation packages are thus merited to ensure these rare breeds stay on the ranch.
But abilities and merit may not mean as much as institutional mechanisms designed to produce higher and higher paydays.
As the Times article notes, “Chummy boardrooms, easily achieved performance targets and large discretionary bonuses—these are the hallmarks of executive compensation today. And as long as compensation is determined by insular groups of board members, there is little chance that the feeding frenzy will end anytime soon.”
For many executives on the list, the bulk of compensation comes in the form of stock and options rather than cash.
According to Equilar, Satya Nadella’s total cash compensation, which includes base pay, bonuses, and perks, comes to $4,531,646, compared to the $79,777,109 he gets in stock.
The theory behind stock as compensation is that it provides an incentive to executives to manage the company soundly, because the better the company does, the more their own stock is worth.
I think there’s merit in that argument. However, the Times article says there are ways to gauge performance that all but guarantee a stock bonanza:
“When stock awards are tied to benchmarks in a company’s share price, the targets are frequently set so low that only a catastrophic failure would prevent a chief executive from reaping the reward, shareholder rights activists say. And when the broader stock market is rising, a C.E.O. need do little more than not destroy the company to look like a visionary leader.”
In other words, not all of these executives ride unicorns and wield +4 business swords. The majority are probably good at what they do, and a few might be very good. But 190 times more valuable than the median? That seems inconceivable.
You can see the full list of the top 200 highest paid CEOs, compiled by the New York Times and Equilar.
And here’s the tech executives from the list, along with their rank and total compensation:
- Satya Nadella, Microsoft $84.3 million
- Nicholas Woodman, GoPro $77.4 million
- Larry Ellison, Oracle $67.2 million
- Steven M. Mollenkopf, Qualcomm $60.7 million
- Marissa Mayer, Yahoo $42 million
- Marc Benioff, Salesforce $39.9 million
- Zachary Nelson, NetSuite $31.6 million
- Brian L Roberts, Comcast $26.4 million
- Michael J. Saylor, MicroStrategy $24.1 million
- James L. Dolan, Cablevision $23.6
- Meg Whitman, HP $19.6 million
- Virginia M. Rometty, IBM $17.9 million
- Shantanu Narayen, Adobe Systems $17.8 million
- Brad D. Smith, Intuit $16.5 million
- John Chambers, Cisco Systems $16.48 million
- Scott A. McGregor, Broadcom $16.45 million
- Dave Schaffer, Cogent Communications $16.43 million
- Thomas M. Rutledge, Charter Communications $16.1 million
- Jeffrey Weiner, LinkedIn $15.6 million
- Richard K. Templeton, Texas Instruments $14.8 million
- Mikkel Svane, Zendesk $14.3 million
- David G. DeWalt, FireEye $13.5 million