Outrage at Hedge Fund Proves Futile as US CEOs Reap Record Pay
Even in the moneyed world of high finance, advisers warned, Jimmy Levin’s pay deal was an exceedingly rich one.
The newly appointed chief executive officer of Sculptor Capital Management Inc. would almost certainly make around $100 million a year, they told the hedge fund’s board. And if results were good, Levin’s haul could very well approach twice that—a staggering amount at a firm with a market value then around $1 billion.
The pay briefly caused a stir on Wall Street. A Sculptor director resigned in protest. Then the world moved on. Levin never became a national news story.
Nine-figure paychecks, once a rarity, are proliferating despite critics on Capitol Hill and beyond.
Last year now stands as the most lavish on record for executive compensation by almost any measure. More than 30 public-company executives had pay deals that exceeded $100 million in value at the end of fiscal 2021, according to the Bloomberg Pay Index. The top dozen packages all surpassed $200 million. A couple shot into the billions.
The exuberance behind the payouts has since petered out, at least for the time being. Inflation is forcing consumers to rethink spending and the Federal Reserve to raise interest rates at a rapid clip. Equities are down, and many packages have dipped in value, in some cases dramatically.
But longtime observers point out that while downturns come and go, CEO pay historically only trends up.
“It’s another version of ‘more for them and less for us,’” Fred Redmond, secretary-treasurer of the AFL-CIO, said last month. “And it comes at a time when working people’s living standards have declined with every increase in the price of food, rent and gas.”
Highest Paid CEOs and Executives in 2021
- Salary
- Bonus
- Stock Awards
- Option Awards
- Perks
| Rank | Name | Company | Total | Breakdown |
|---|---|---|---|---|
| 1 | Elon MuskCEO |
Tesla |
10,077,116,351 |
10.1B |
| 2 | Robert ScaringeCEO |
Rivian Automotive |
2,289,370,481 |
650K2.29B126K |
| 3 | Tim CookCEO |
Apple |
853,780,236 |
3.00M12.0M837M1.39M |
| 4 | Peter RawlinsonCEO/CTO |
Lucid |
575,681,738 |
529K2.41M566M6.57M |
| 5 | Tom SiebelCEO |
C3.ai |
343,925,146 |
5,646.00344M |
| 6 | Sue NabiCEO |
Coty |
283,791,455 |
3.55M280M42.5K |
| 7 | Joe BaeCo-CEO |
KKR |
279,100,653 |
300K24.7M196M58.4M |
| 8 | Tomer WeingartenCEO |
SentinelOne |
275,775,959 |
472K542K275M |
| 9 | Alex KarpCEO |
Palantir Technologies |
264,229,473 |
1.10M71.0M189M3.38M |
| 10 | Sid SijbrandijCEO |
GitLab |
263,703,427 |
0.25192M71.7M |
| 11 | Alex RodriguesCEO |
Embark Technology |
252,467,967 |
180K252M |
| 12 | Scott NuttallCo-CEO |
KKR |
233,349,930 |
300K24.7M152M56.0M |
| 13 | Brian ArmstrongCEO |
Coinbase |
218,090,453 |
1.00M215M1.99M |
| 14 | Jimmy LevinCEO/CIO |
Sculptor Capital Management |
200,053,339 |
18.5M117M64.1M |
For a fourth straight year, the pack is being led by Tesla Inc.’s Elon Musk, whose mega-grant from 2018 is allocated over a decade by the Bloomberg Pay Index. So far, he has collected 11 of the 12 tranches of stock options, which have added $78 billion to his personal fortune and helped make him the richest person on the planet.
Behind him are a group of corporate leaders in charge of businesses making everything from electric cars to makeup to security software. The sizes and shapes of their awards differ, but they’re usually presented and rationalized with variations of a similar message: This is what’s appropriate based on the person’s skills, job duties, goals—and what executives elsewhere get paid.
In a statement to Bloomberg, Sculptor wrote of its CEO’s package: “The majority of the reported compensation has not been received by Mr. Levin and requires that substantial shareholder return thresholds are met over a multiyear vesting period, aligning pay to performance for our shareholders and clients.”
Such rewards have become the envy of leaders in some industries, like the big US banks, whose pay decisions tend to draw particular scrutiny by both lawmakers and the public.
Last year, both JPMorgan Chase & Co. and Goldman Sachs Group Inc. handed special awards worth tens of millions of dollars to their CEOs and other senior leaders. In Goldman’s case, they came as CEO David Solomon and other top executives quietly pushed for bigger rewards.
They’re still earning nowhere near what some of their clients reap. As an executive at a big US asset manager recently quipped in a private conversation, only half-joking: which CEO doesn’t get paid nine figures these days?
“Greedflation,” blared the headline of AFL-CIO’s annual survey of executive pay. It noted that the average package for an S&P 500 CEO rose 18% in the past fiscal year to $18.3 million, 324 times a typical worker at those same companies took home. That ratio has jumped 23% since the onset of the Covid-19 pandemic, the survey noted.
Elsewhere, consultants who advise companies on compensation published analyses finding that the increases for the most part reflected higher stock prices and better results.
At least for now, few executives have gone unscathed by the plunge in stocks that began this year. The paper values of the worst-hit packages have fallen more than 90%. Some performance targets are sliding further out of reach. If the downturn is prolonged, some might reap only a fraction of the awards in their contracts.
C3.ai Inc. disputed Bloomberg’s valuation of the millions of stock options it granted to founder and CEO Tom Siebel. In a statement, a spokesperson called Bloomberg’s methodology “absolute nonsense” and said it had no “basis in the financial literature, securities regulations, tax literature, generally accepted accounting principles nor common sense.”
Bloomberg valued Siebel’s stock options with the Black-Scholes model, using C3’s assumptions disclosed in its annual report, and the closing share price on its final day of fiscal 2021. The stock is down 67% since then.
At Coty Inc., Sue Nabi scored perhaps the biggest CEO pay deal ever granted in the world of beauty: $283 million. In 2023, once she’s collected all the shares included in the package, she’s poised to own roughly 3% of the company.
Coty noted that she only realized $3.55 million in salary for fiscal 2021. The remainder is an equity award that vests over three years. She started in September 2020 at a “time of crisis for the business” and has overseen a 117% share price increase since then.
“Nabi is one of the beauty industry’s leading founder talents: a hugely respected business leader with an outstanding track record,” the company said in a statement. “In order to attract a true entrepreneur like her, Coty needed to have an enticing equity scheme.”
SentinelOne said the company “believes this calculation is not representative of Mr. Weingarten’s compensation as it does not account for the performance-based and multiyear structure of Weingarten’s 2021 stock grants.”
A spokesperson for Embark Technology Inc. noted that the pay of CEO Alex Rodrigues mostly came in performance stock that vests in increments only if the share price exceeds thresholds ranging from $400 to $2,000 (reflecting a 1-for-20 stock split completed this week.) Embark, which develops autonomous technology for the trucking industry and went public in November, closed Wednesday at $13.19.
While this year’s market swoon stings, skeptics point out that things usually play out favorably for those at the top. For example, stock options granted at the depth of the Great Recession exploded in value in the following years. After the pandemic struck in 2020, hundreds of boards eased targets or granted extra bonuses to give their executives a break as lockdowns in some cases torpedoed results.
“That’s when the frustration and hypocrisy comes in,” said Rosanna Landis Weaver, a senior program manager at shareholder advocacy nonprofit As You Sow. When a company’s stock tumbles, “You’ll hear, ‘It was due to an external event.’ But it never was because of an ‘external event’ when the stock went up.”
Though more shareholders have gotten critical of pay plans, the increased resistance is marginal and the impact—if there is any—is hard to discern. Around 3.2% of companies in the Russell 3000 received less than 50% shareholder support for their executive pay plans, data compiled by Bloomberg Intelligence show. That compares with 2.8% in the prior year.
On rare occasions, though, the pay can swell in ways that make the directors in charge uncomfortable.
In January, J. Morgan Rutman resigned from the board of Sculptor, the New York hedge fund, and wrote a letter that criticized the panel’s deferential attitude toward Levin and the pay package he’d been granted. The letter cited a report from the board’s outside adviser, which had concluded that Levin’s pay level was “exceedingly rare.”
Sculptor said at the time that Rutman’s letter selectively quoted from the adviser’s report and was “filled with significant factual inaccuracies, material omissions and baseless assertions that present a misleading view of board governance.” The letter also omitted that the pay was reasonable considering the “unique nature of the company’s ongoing transformation,” according to the hedge fund.
Levin, who had been the firm’s investment chief for several years, also took on the CEO job in 2021. As such, he received separate compensation for both roles, an unusual arrangement, through a complex mix of cash and equity tied to fund performance and stock return.
To justify the pay, Rutman wrote, the board looked at privately held hedge funds and noted that the top 25 hedge fund managers have been paid on average $200 million to $2.7 billion since 2009. Rutman said this comparison was out of whack and that Levin’s performance requirements were too favorable to him.
Also missing, according to Rutman: “A meaningful analysis of whether an award of this magnitude was actually needed to retain Mr. Levin’s services.”
Check our past Highest Paid Executives rankings for 2015, 2016, 2017, 2018, 2019 and 2020
Correction: Updates with change in CEO-to-worker pay since the onset of the pandemic in 15th paragraph.