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CEO Daily: Thursday, 22nd June

June 22, 2017, 12:15 PM UTC

Good morning.

According to Equilar, median pay for the CEOs of the largest 500 U.S. companies by revenue rose 6.1% last year to $11 million, the biggest increase in the 17 years Equilar has been tracking that metric. For comparison the Bureau of Labor Statistics said median earnings for U.S. workers rose 2.8%. The multiple of one to the other now stands at 254 times, up from 247 times last year, according to BLS data.

I don’t intend to turn this newsletter into the editorial page of Pravda in Alan’s absence, but it seems legitimate to highlight the apparent discrepancy between this figure and what seems to be the increasingly frequent expression of concern from business leaders about inequality, social contracts and the like. Recognizing the phenomenon of constantly widening inequality is a necessary and welcome start, but only that.

It shouldn’t need to be said that this trend, in a country of universal suffrage, is unsustainable. The income gap widened during the boom, paused only briefly (and by no means universally) during the recession, and it continues to widen through this mature if historically anaemic recovery. To those who believe in the ability of markets to correct themselves over time—under what set of macro circumstances does it revert to the mean?

Or, to paraphrase Ronald Reagan (who was admittedly talking about something entirely different): “If not now—when? If not us—who?”

Of course, no data point encompasses all the various nuances of companies’ individual compensation plans. Especially not when a variable like the stock market plays such a role in setting compensation levels. But it does seem reasonable to expect a company that can sequence genes, or make cars drive by themselves, or tell an individual where he is on the planet within a 10-yard margin of error in real time, to be able to calculate and disclose a simple CEO-to-median wage ratio.

Doesn’t it?

News below.

Geoffrey Smith

(Alan Murray is taking a hard-earned break and will return on Monday.)

Top News

China Probes Big Spenders

China’s banking regulator launched an investigation of the loans that have allowed a handful of companies to expand overseas with big acquisitions in recent years. The FT cited a top regulator as fretting about “the systemic risk of some large enterprises.” According to unconfirmed reports, the companies on the list include Anbang Insurance Group, the owner of the Waldorf Astoria and would-have-been business partner of Jared Kushner; Wanda Group, which ran amok in Hollywood for the last two years; HNA; and Fosun International. Shares in their listed subsidiaries fell sharply Thursday, less than 24 hours after becoming eligible for consideration in MSCI’s benchmark stock indexes. HNA alone admits to around $104 billion in debt, double what S&P Global Market Intelligence estimates, according to the WSJ FT, metered access

Russia Tried to Hack Nearly Half the U.S. Voting Systems

Russian hackers targeted 21 U.S. states' election systems in last year's presidential race, a Department of Homeland Security official told the Senate Intelligence Committee. Jeanette Manfra, acting DHS deputy undersecretary of cyber security, didn’t identify the targeted states (Arizona and Illinois said they had been targeted last year). Another official, FBI assistant director of counterintelligence Bill Priestap, said the primary goal was “to sow discord and try to delegitimize our free and fair election process.” The ‘denigration’ of Hillary Clinton and boosting of Donald Trump was a secondary aim, he said. The testimony, the starkest to date on the subject, adds to pressure for fresh sanctions to punish Russia for its meddling. Fortune

Nike Cuts Retailers Loose

Nike is to start selling some items directly on Amazon for the first time, according to The Wall Street Journal’s sources. It feels like a landmark moment for the two top names in their respective sectors. However Nike might sugar-coat the pill for its traditional distributors, its move looks like a decisive loss of faith, and one that could easily create a vicious circle, given that it accounts for over two-thirds of sales at companies such as Foot Locker and Finish Line. Shares in both of those fell by around 5% yesterday. At the same time, it’s a sign that premium brands are no longer in thrall to the fear of brand dilution that has kept them from selling directly on Amazon until now. Fortune

Oracle Makes Good on Cloud Boasts

Oracle founder Larry Ellison’s boasts that Oracle’s Cloud services are better than those of Amazon, Microsoft et al. are looking less outlandish this morning. The company’s stock rose 10% after the bell Wednesday in reaction to fourth-quarter data showing a 15% year-on-year rise in net income, due in part to its beating its annual revenue target of $2 billion for new Cloud-based business. Oracle is changing the way it reports its Cloud business numbers, which will make direct comparisons with its rivals more difficult. But the days when it appeared to be watching others disappear over the horizon appear long gone. Fortune

Around the Water Cooler

Apple Puts the Squeeze on Music Labels

Apple is putting the squeeze on the music industry. Bloomberg’s sources say it is looking to pay lower royalty rates to the big three music labels—Universal Music Group, Sony, and Warner—when its current batch of two-year contracts end in the next few weeks. Streaming services such as Apple Music and its larger rival Spotify helped drive music labels’ revenue up nearly 6% last year, but not even Spotify has managed to break even on the now-dominant distribution model. Spotify is under more pressure to do so because of its desire to go public, and the fact that it’s not part of an immensely profitable hardware maker. Bloomberg

Intel the Olympian

Intel said it is to sponsor the Olympic games for the next six years, a week after McDonald’s withdrew from its sponsorship deal with the IOC ahead of time. The strategically-challenged fast-food giant has less money to throw around than the booming chip industry, and Intel’s profile meets the IOC’s purported desire to make the games look more tech-savvy and relevant to the younger generation (we’d still guess that most young people recognize a Big Mac more easily than an Intel chip, but maybe that will have changed by 2024). Intel said it would provide 5G wireless technology, virtual reality, artificial intelligence platforms, and drones to the Games, which are the sporting world’s most commercially valuable event. The deal will help Intel raise its profile in Asia, which is hosting three games (two winter and one summer) between 2018 and 2022. Fortune

What a Winning Smile Can Do for Your Business

George Clooney and his business partners are selling their fast-growing tequila brand, Casamigos, to liquor giant Diageo, the company behind Smirnoff, Johnnie Walker, and Don Julio. Diageo agreed to pay up to $1 billion for the brand created in 2013 by the Academy Award-winning actor. It will pay $700 million upfront, with $300 million in extra compensation based on the performance of the brand over the next decade. Suspicions that the U.K. company were dazzled by star quality are well-founded. It won’t contribute to Diageo’s EPS for four years. Fortune

At Last, the Ken Doll With a Dad Bod

And finally, Mattel updated its range of Ken dolls, mirroring the changes it made to Barbie last year by broadening the range of skin tones and body shapes. One of the new Kens, I’m delighted to report, even has a Dad bod. Well, Mattel’s approximation of one, anyway. The belly is rounder and the arms and wrists are, er, fuller. It’s not clear whether they also come with pattern baldness, varicose veins, and ‘flexible’ knees that make authentic creaking sounds. Of course, demand for an ill-fitting Ken wardrobe 10 years out of date can be met by just buying old stock on eBay. Next time, Mattel, just ask me first. Fortune