Disney heir on CEO's $66M pay: 'No one on the freaking planet is worth that'

Adam Sandler earned $39.5 million to produce some mediocrity. We should obviously make that illegal, right?

So if you run a $223 billion company like Disney, you should earn 1/20th what Adam Sandler does to squeeze out a few bad movies for Netflix.

How about running a trillion dollar company like Microsoft, one of the most important companies in world history and critical to the US economy? Satya Nadella should probably earn less than Simon Cowell, #64 on the Forbes list at $43.5 million in earnings.

Why does Lebron James get to earn $85.5 million? The retort will always be: because James is worth it.

So is an elite CEO running a massive company. The reality is that today these are normal earnings figures for people operating in elite positions where enormous economic value is in play. People in these pay arguments always intentionally devalue the knowledge, experience and skill that is required to operate a company the scale of Disney (that's how they can lay out the premise with a straight face that average worker pay to CEO pay should be low): it's one of the most difficult jobs on earth, and far more difficult and challenging than anything Jimmy Garoppolo will ever do on a football field.

The average Lakers employee isn't worth 1/1000th what Lebron James is to the franchise. The average worker is not worth 1/1000th what Iger is to Disney. That's entirely correct economic math. It's that reality that irrationally upsets almost everyone, because they like to pretend it takes only modest knowledge, experience and skill to operate something like Disney, when in fact being able to do it well is a more rare talent than what the typical elite athlete represents. It's excused in sports only because supposedly that's easier to measure (and yet it still doesn't change the fact that Lebron James earns so much more than the typical worker in the Lakers organization).

https://www.forbes.com/celebrities/list/

No they don't. Boards buy back stock. CEOs cannot realistically buy back company stock themselves. I mean, Iger only made $3million in cash, so this would be a losing strategy for him.

What number of shares are institutional, hedge funds, retail investors, high frequency traders, etc.

I hear it all of the time: "the retail investors are buying into Tesla/Netflix heavy, it's really running the price up"

I really don't feel like the bottom 90% of retail investors can move the needle compared to big money, but I've never been able to prove it statistically.

0: http://www.nber.org/papers/w24085

1: https://www.taxpolicycenter.org/sites/default/files/alfresco...

Sure, if he gave it to you, you can be certain the stock price of disney would be lower!

> And since the studies have shown that high-priced CEOs underperform, those Disney shareholders could have made a ton more money with a $1,000,000/year CEO. Too bad for them

You may be right. However, the disney shareholders are free to fire the CEO at any time and I am unclear why I -- a non disney shareholder -- really ought to care if they want to waste their money.

No? If you have run something of value and you have a vested stake in its interest (i.e. a share) and you decide to get rid of them because you're either uninterested in that thing or you believe your money is better spent elsewhere, isn't it right that your lack of confidence in the very thing you run sends a signal to the rest of the market?

If the CEO of a non-profit decides to quit abruptly, wouldn't that make everyone rightfully worried over the future of that entity?

> What if he just wanted to retire buying an island, building a castle, moving there and forgetting the business, not because he believes the business isn't going to grow but because he feels it's enough for him?

Then, it's appropriate that the share price fall because the cost of transitioning leadership so abruptly will certainly affect the previously forecasted future earnings off of which the share price was established to begin with.

Many regulations on the stock market are there because of past abuses. I'm typically rather anti-regulation as well, but it's like when you see "do not eat" labels on a box of razor blades: you know it's there because some one did it (and probably sued). Letting executives arbitrarily sell stock on a public exchange could have serious ramifications.

> What if he just wanted to retire buying an island, building a castle, moving there and forgetting the business, not because he believes the business isn't going to grow but because he feels it's enough for him?

His net worth is estimated at $350 million, from what I could find. Do you really think he's set an arbitrary target of $416 million net worth to just give up?

And as a side note, I (living in Orlando) actually know several folks who invest heavily in Disney stock as Disney employees. I’m guessing they get a preferential price on it and it’s a growing investment for them.

Disney is an S&P 500 company. Many mutual funds and retirement funds track the S&P 500 and various other indices. They do this by investing money in the public companies that make up those funds.

Of course it's not just S&P 500 companies that get invested in by institutional investors. Retirement funds typically seek to generate higher returns on retirement funds from younger employees. To do this, they have to invest in riskier businesses, which typically means smaller investments in larger numbers of newer businesses. Thus, to simplify things, we can pretty much say that any public company traded on a major stock exchange can (and does) affect the price of retirement savings accounts.

At the core of it, every public company, regardless of their business, is simply an investment vehicle in which people can put wealth in the hopes of competing successfully against inflation. The creation of a share price increase greater than inflation increases the wealth of the shareholders, and creates new money from thin air.

This creation of money is how all people can afford retirement. Simply saving your money in an account which keeps the nominal amount of cash would lead to loss from inflation. Most people will not contribute enough money to have enough in retirement savings. Thus, they depend in some way on the creation of money by private enterprise to subsidise their retirement.

This is true regardless of whether retirement accounts are self-directed (as in a 401k), centrally managed (as in a pension), or government run (as in social security). The connection to self-directed and managed accounts is obvious. Governments of course rely on the creation of money to fund tax revenue that is then put towards government retirement programs.

But the CEO was only paid $3million in cash, which is a different order of magnitude in wage multiplier when compared with the lowest employee. I'm unsure what the stock distribution program that disney may or may not have to employees. I actually have no doubt that disney shortchanges their lowest level employees.

But, that is not the question at hand. The company is being asked to provide equivalent wages. To do that, the lowest level employees would get paid cash + stock. That would allow us to make a fairer comparison, but it would not look like what the article wants.

> Why does the CEO get so many thousands of shares of Disney stock rather than a large portion of that package going to the many thousands of workers that also helped the company grow in value?

Morally, I don't disagree with you, but this is certainly not what people mean when they make these wage comparisons. Can you imagine if an employee got minimum wage + hundreds of stock? Most people would think that is the company short changing the employee.

> I don’t believe the CEO caused all of that rise in the stock, and the issue is whether one person should even be in a position to benefit that much while others get a meager salary.

The shareholders of disney think so. Perhaps he did not. I don't know. They are free to fire him if they don't like him.

It certainly wasn't just Iger's decisions that led to this growth, but it isn't much of a stretch for investors to believe his decisions were responsible for at least a small portion of that. Iger's $60M equity grant dilutes shareholders by roughly 0.02%. If the only thing Iger did was make decisions that resulted in Disney being 0.03% more valuable than they otherwise would've been, then Disney investors got a great deal.

The existence of $12/hr jobs at Disney is a totally legitimate concern, but I believe that's a separate issue.

One of the biggest confounding factors is the external market. The price of something/someone isn't determine solely by their value, but also by their rarity in the market. Water is essential to life, but you won't pay $infinity for it, because someone else will offer it for cheaper. Whereas a golden nugget may be close to useless in your eyes, but you still can't get one for cheap, because someone else who values it is willing to pay more. That's the market at work.

Analogously, many rank-and-file employees (us programmers included) are easily replaceable. We've developed a well-defined set of skills that slot perfectly into some box that was defined by business owners, so of course many others have squished themselves to fit into the same shape. They're our competition. So yeah, perhaps we contribute meaningful value to our companies, great. But why should they pay us $X if someone else will come along and do the exact same job providing the exact same value for $X-1? Whereas many stellar CEO candidates highly sought after and will have many competing offers and opportunities, driving up their price. If you were easily willing to hire your perfect CEO candidate for $Y, will you also hire her for $Y + $1? What about $Y + $100K? What about $Y + $10MM? Obviously there's a cutoff, yes, but obviously it's significantly higher than $Y if you really value this person and can't easily find an equivalent replacement.

Okay, what about rewarding employees en masse? If you pay _all_ of your developers a higher salary, won't that attract a higher tier of developers than your competition is hiring? Probably. A lot of companies do exactly that. But it's not universally true. It depends on your industry, your competition, the role, etc. For example, due to diminishing returns, your business might not _need_ the highest tier employees at certain roles to have a significant impact. Or there might be such a massive surplus of people to fill that role that it doesn't matter what you pay, you'll still get good people.

Etc.

My personal takeaway from all of this is that, as an employee, you should think of yourself as a business. That means you have to consider your competition (other ppl who have your skillset) as well as your customers (the businesses that pay you for your services). More specifically, you need to figure out how to differentiate yourself from the competition so your price isn't easily driven down. At the same time, you should work to maximize the value you provide to your employer's bottom line, so they have a stronger reason to pay you more. And of course you'll need to be able to do so in a measurable way if you want them to believe you. This last part is why salespeople can easily charge commission, but programmer #5532 working on Tiny Part of Major System cannot.

On a broader scale, I personally believe that it's society's responsibility to create a safety net that prevents people from going hungry or living on the streets. If you're not particularly skilled at, interested in, or capable of playing the capitalism game, it shouldn't mean that you aren't guaranteed basic human rights and dignity. Let the people who want to run fast do so, and let everyone else live happy lives regardless.

The cases you mention show exactly the issue with having a poor CEO. The fact is both of these managers attempted to keep their companies in markets in which they could not make money.

It is useful to think of a CEO not as a day-to-day operations manager, but rather as an institutional investor charged with seeking a larger return on the money invested in their fund by engaging in direct business transactions (rather than purchasing shares for example). In this sense, both JCP and Yahoo failed to manage their money properly.

(BTW, being Marissa Mayer or an 'ex-apple retailer' does not make one a good CEO, as demonstrated by your examples)

Just because it's possible for him to do the same job at a lower salary doesn't mean he will. Disney needs to pay him enough so that he doesn't take a higher paying job elsewhere.

However in saying that we live in a culture and climate which pays people somewhat (mostly) on the value of the services/skills they provide. So if you're a janitor, then you are probably going to get a low salary and it would be hard to justify increasing that salary simply because the cost of living is high.

If this guy earns $660,000 or $66m, the problem at the lower end still exists.