KUALA LUMPUR (March 1): Google's Sundar Pichai came out tops in a new study that ranks the 100 most "overpaid" CEOs in America, after earning US$281 million (RM1.14 billion).
In the study released last Thursday by non-profit group As You Sow, it said CEO pay increased 14% in 2019 from the year before, to an average of US$21.3 million.
The report compared executive compensation to a company's shareholder return over the past five years to determine "excess" CEO pay, and urges major shareholders to crack down on exorbitant compensation.
For Google, the authors argued that some 95% of Pichai's pay is excessive, and noted that he earns more than 1,000 times the salary of an average Google employee.
The author of the report is As You Sow executive compensation program manager Rosanna Landis Weaver, who began her corporate governance career with a position in the corporate affairs office at the International Brotherhood of Teamsters in 1992, supervising research on corporate governance.
Weaver said Pichai, the CEO of Alphabet, was awarded US$280,621,552 in compensation in 2019, more than 20 times what the CEO of a typical S&P 500 company is paid and more than 1,000 times what the median employee of Alphabet was paid.
She said Institutional Shareholder Services (ISS) stated that the company’s compensation committee “has demonstrated poor stewardship of pay programs as evidenced by recurring concerns of outsized awards that are not sufficiently performance-based”.
Weaver said ISS recommended that shareholders vote against the CEO pay package and also vote against re-electing to the company board the members of the board’s compensation committee, namely Alan Mulally, Robin Washington, K Ram Shriram, and L John Doerr.
Glass Lewis, the other major proxy advisory firm, advised: “Shareholders should note the lack of outperformance…
“In light of the disconnect of pay to performance and our concerns with the quantum of Pichai’s pay, we do not believe shareholders should support this (CEO pay) proposal,” it said.
Financial managers who voted to approve the CEO pay package at Alphabet include BlackRock, Fidelity Management and Research (FMR), and Northern Trust.
Of the shares of the company controlled by outside financial managers, approximately 70% of those shares voted against the CEO pay package.
But since the two founders of Alphabet, Larry Page and Sergei Brin, who own less than 6% of the shares in the company, have extraordinary voting power (i.e., their shares give them more than 50% of the votes at the shareholder meeting), the final total showed that 25% of the shares voted against the CEO pay package.
The report also argued that many companies were 'repeat offenders', the worst being Discovery, Disney, and Comcast.
The CEOs of those three companies have been paid more than US$744 million in three years, even though the businesses have consistently underperformed financially, the study said.