When the share price falls, the CEO and other executives take an automatic pay cut that's pretty directly linked to that (linear in the case of RSUs, superlinear in the case of options).
The problem is that we're talking about an ASTRONOMICAL sum of money when it comes to people like Tim Cook. After the 50% pay cut, he's still making $49 million. Beyond a certain level of wealth, the numerical value of one's compensation becomes effectively meaningless. It's just theater for him to say he's taking a "pay cut".
Depends on your lifestyle inflation. Even for the high earners in the US, 49 million per year is FIRE money, but if you're used to the life of an oil sheikh with luxury clothing, jewelry, art, exotic private parties, dozens of rare supercars, private jets and yachts, McMansions/penthouses in London, Paris, Geneva, NY, Tokyo, etc., some private island where it's nice and warm, and also want to leave a similar lifestyle for your kids and their kids and their kids' kids, then 49 million per year is basically poverty money.
You'd think a quote like this, pulled out of context, would change its meaning once seen in context. It doesn't.
There's a vast difference between not being able to afford an absurd lifestyle of consumption and extravagance and being able to eat.
Someone's who's salary is cut from $100M a year to $49M a year, no matter how insane their spending was, isn't going to suffer.
If it's not clear: someone having to choose to buy a Ferrari instead of a Bugatti because of a pay cut is not the same as someone having to choose between shelter or food because of a pay cut.
Using a 3% withdrawal rate, $49m let's you safely live off $1.47m per year, far above what "high earners" are even earning. And that's just a flat $49m. You are saying $49m per year. That's a fucking ludicrous amount of money. Even if your hobby is dropping Bugattis off cliffs you won't exhaust that much income.
The problem with shares is that they have become (or maybe have always been) a purely speculative asset. They rarely reflect the reality, and are always expected to just rise rise rise in price. Even if literally nothing changes, the company remains stable and profitable, the shares will take a dive because continuous unlimited growth is always expected.
At the end of the day all stock market returns come from one's of 3 things:
Dividends
Earnings per Share growth
Multiple expansion
Over the long run the speculation that you so decry ( which amounts to Multiple expansion) has a negligible impact (less than 1%).
Sure you have plenty of short term booms and busts, but over the long term they are really irrelevant.
None of which really reflect reality, and rely on basically pure speculation.
They also depend on the stock to go up up up up.
> Over the long run the speculation that you so decry ( which amounts to Multiple expansion) has a negligible impact (less than 1%).
Over the long run stocks are just speculation.
Dividends (especially for companies with a long track record of paying and increasing them) are reality as far as I can tell.
Stock PICKing is speculative because we can’t predict the future. But that doesn’t mean that the future is unhinged from underlying fundamentals.
If you have options on 50K of those same shares at a strike of $80, the options are in the money by that same $1M. If the shares go down by 10%, the in-the-money amount falls by 50% (to $500K) rather than by 10% (to 900K).