Are tech’s wealthiest men worth their pay?

190725 Mark Zuckerberg
Mark Zuckerberg has pulled in $5.7 billion from Facebook since the company went public in 2012. Image Credit: AP

New York: Apple paid its chief executive, Tim Cook, $1.4 billion in total since 2007. Oracle’s chairman, Larry Ellison, racked up stock and cash valued at nearly $1.9 billion over the same period. And Mark Zuckerberg has pulled in $5.7 billion from Facebook since the company went public in 2012.

These are among the billion-dollar men of the technology industry. The cumulative paychecks of a half-dozen executives topped $13.2 billion, according to a new analysis of the past 15 years. Those are years in which tech companies become powerful forces in the economy, our lives and world affairs. The mood about technology has soured more recently, but the tech bosses’ paychecks mostly remained unscathed.

The New York Times published on Friday an analysis of the most highly paid chief executives of America’s publicly traded companies in 2020. During the pandemic, the executives received some of the richest pay packages ever, my colleague Peter Eavis reported.

Tim Cook launching Apple News
Apple paid its chief executive, Tim Cook, $1.4 billion in total since 2007.

To get a picture of what companies paid their bosses over a longer period of time, executive compensation consulting firm Equilar ranked the 10 executives with the most cumulative total pay, going as far back as 2006 when there was a change in corporate compensation disclosures. Tech bosses took six of those 10 spots, largely because of the value of stock that their companies gave them.

Billion dollar paychecks

The billion-dollar-plus paychecks of a handful of men – and yes, they’re all men – brings up a big and unanswerable question: How do we know if they’re worth the money?

Baseball stat geeks know about a measure called wins above replacement, which tries to quantify the value of a player by estimating how many more or fewer wins a team has with him compared with a replacement who might be cheaper. Even in the tech industry, which obsesses over data, there is little attempt to apply a wins above replacement stat for the corner office.

Maybe a hypothetical replacement leader of Alphabet would do a better job than Sundar Pichai, and for less than the $1.1 billion in stock and other compensation that Google’s parent company has paid him since 2015, according to the Equilar analysis. Boards of directors don’t typically try to find out. CEOs are paid what they’re paid.

Let me dig deeper into a couple of the CEO pay figures. Calculating what corporate chiefs are “paid” is a complicated and contentious exercise. In some cases, the tech bosses’ compensation is even larger than the mind-boggling numbers initially suggested.

When Cook took over for Steve Jobs in 2011 as Apple’s CEO, the company pledged to give him as many as 28 million shares, after adjusting for stock splits, over the next decade. Back then, Cook topped The Times’s annual ranking of highest paid CEOs, based largely on the potentially $376 million value of that stock. One expert called Cook’s stock award “historic to such a degree that it skews the numbers.”

But Cook would take home all the shares only if he stuck around for 10 years and if the company’s stock price rose faster than that of most other large companies. So what will happen? Cook is likely to collect all or nearly all of the shares, with a final batch due in August. Those shares, by one calculation, are now worth $3.5 billion, or nearly 10 times that “historic” number a decade ago.

Justifying fat executive compensation

Companies typically justify top-dollar executive paychecks by saying that the bosses are irreplaceable and that they only get rich when shareholders do, because they are paid largely in stock. Cook’s wallet has gotten fatter since 2011 from Apple’s climbing stock price, right alongside anyone who happened to buy Apple stock.

Oracle’s chairman, Larry Ellison, racked up stock and cash valued at nearly $1.9 billion since 2007.

But again, it’s hard to assess how much of Apple’s financial or stock performance is Cook’s doing. Maybe you would do 80% as well as Cook at a fraction of the cost.

Apple doesn’t disclose the $3.5 billion figure directly. I tallied it from Apple’s annual statements to shareholders. Equilar calculated that Cook’s cumulative compensation since 2007, when he was Apple’s chief operating officer, is $1.4 billion. Equilar’s figure assessed the value of Cook’s stock in each year that it was released to him, not the current value of those shares. Like I said, there are many ways to slice and dice CEO pay.

The figures might seem light years (or a handful of zeros) away from most people’s financial situations, but they also have a heartening message for anyone who feels clueless about money.

Zuckerberg topped the Equilar ranking of longer-term CEO pay, almost entirely from stock options on 120 million shares that Facebook handed him shortly after the company was founded. Zuckerberg sold about one-third of those shares for $2.3 billion more than a year after Facebook went public. If he’d held onto those shares instead, they’d be worth nearly $14 billion now.

But don’t loose sleep worrying about Zuckerberg’s poorly timed stock sale. He’s still worth $124 billion.