The median employee at Align Technologies, the company that makes Invisalign, makes $13,180 a year. The CEO makes $41,758,338. That’s a pay ratio of 3,168:1. And if you look at how the company performed over the long term, he was only worth about about $14 million dollars, meaning he was overpaid by some $27 million. That’s according to a new report that compares CEO pay to a company’s total shareholder return, a metric that tracks performance over five years.
In the report, “The 100 Most Overpaid CEOs,” the nonprofit As You Sow lists the most egregious examples. The CEO compensation and average employee compensation come from data that corporations now have to disclose to the SEC and are based on data from the most recent fiscal year. The “overpayment” calculation is based on a statistical regression model from the investment services company HIP Investor that looks at what CEOs should have made based on longer-term company performance. Here are the top 10, by the percent they were overpaid:
- Oracle Corporation’s Mark Hurd (now deceased) & Safra Catz made $216,577,356 as co-CEOs, an overpayment of $204 million compared to total shareholder return. The median worker pay was $89,887.
- Align Technology’s Joseph Hogan, as noted above, made $41,758,338, an overpayment of $27 million. The median employee made $13,180.
- Walt Disney’s Robert Iger made $65,645,214, an overpayment of $52.9 million. The median worker pay was $46,127.
- Discovery’s David Zaslav made $129,499,005, an overpayment of $117.9 million. The median worker pay was $85,704.
- CenturyLink’s Jeffrey Storey made $35,655,646, an overpayment of $24.7 million. The median worker pay was $68,674.
- PayPal’s Daniel Schulman made $37,764,588, an overpayment of $23 million. The median worker pay was $69,600.
- Gap’s Arthur Peck, who has since been replaced, made $20,793,939, an overpayment of $9.8 million. The median worker pay was $5,831 (a pay ratio of 3,566:1).
- Hologic’s Stephen MacMillan made $42,040,142, an overpayment of $29 million. The median worker pay was $87,845.
- Chipotle Mexican Grill’s Brian Niccol made $33,520,940, an overpayment of $21 million. The median worker pay was $13,779.
- Xerox Corporation’s Giovanni Visentin made $23,459,003, an overpayment of $11 million. The median worker pay is $43,953.
CEOs didn’t always earn this much. The average CEO-to-worker compensation ratio in the 1960s was 20:1. A report from the Economic Policy Institute last year found that CEO compensation grew 940% between 1978 and 2018, while worker compensation grew only 12% over the same time period. There are some slow signs of change now: When Disney shareholders objected to Robert Iger’s compensation in 2019, Iger agreed to a reduction in salary and guaranteed bonus of $13.5 million. That’s the kind of thing that could happen more with increased shareholder pressure, says Rosanna Landis Weaver, the author of the report. “Shareholders have not used their power to the full extent that they can,” Weaver says. She argues that compensation should be better linked to true performance. “So many CEOs have been rewarded in the past decade by being in the right place at the right time. The workers did not get similar rewards.”
Policy may also push companies to change. Portland, Oregon, enacted a new tax in 2017 on companies that pay CEOs more than 100 times than median workers; it’s not clear yet what the impact has been. In California, proposed legislation calls for taxing corporations at a higher rate if they have a high pay gap between workers and CEOs. Federally, the proposed “Tax Excessive CEO Pay Act” also calls for linking corporate taxes to high CEO pay. Bernie Sanders has proposed similar legislation. “It is time to send a message to corporate America: If you do not end your greed and corruption, we will end it for you,” he said in a statement.