April 23, 2019
Fortune – CEO Pay: What Was Disney’s Board Thinking?
By Erik Sherman
If you asked Disney CEO Robert Iger how 2018 went at work, he’d probably say great, given the company’s success its businesses, hot reception for the new streaming service, and Monday’s five-year high stock price. Plus, there is the $65.6 million in compensation he received over the year, according to the company’s current proxy statement. The number meant a CEO-to-median employee pay ratio of 1,424 to 1.
The compensation part has not sat well with many. Abigail Disney—granddaughter and grandniece of brothers and co-founders Roy and Walt Disney—called the pay ratio “insane” in a tweet on Sunday. “What on earth would be wrong with shifting some of the profits—the fruits of these employees’ labor— to some folks other than those at the top?” Disney wrote. In the 2018 shareholder advisory vote on executive compensation, more than 52% disapproved. (This year, 39.9% voted against after the company cut tens of millions in Iger’s future pay.)
But even if Iger must struggle on with still making tens of millions annually, the question of his compensation raises the question of how much CEOs should make and what could compel a company’s board of directors to agree to such a large pay package.
Nell Minow, vice chair of ValueEdge Advisors and corporate governance expert, directly owns some shares of Disney and was one who voted against the pack packages in 2018 and 2019, although she praises Iger’s leadership.
“It’s too much [money] and it’s badly structured,” she said. “I think of pay like any other asset expenditure of a company, with return on investment. I’m always very leery of retention-based pay, and I think that’s how these stock grants are justified.” A focus on retention can turn pay into a ‘given’ rather than an amount that is predicated on the CEO further improving company performance.