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Italian Turmoil, Spanish Turmoil, North Korea: CEO Daily for May 29, 2018

May 29, 2018, 10:15 AM UTC
Photograph by Getty Images

Good morning.

The New York Times/Equilar list of the most highly-paid CEOs of publicly-traded corporations was out this weekend. In case you missed it, number one on the list was a Malaysian: Hock Tan, who heads global chip maker Broadcom, best known recently because its effort to take over Qualcomm was blocked by the Trump administration for national security reasons. Tan had total compensation of $103 million last year–mostly in stock awards. Other CEOs in the top ten:

2. First Data’s Frank Bisignano at $102 million

3. Live Nation’s Michael Rapino at $71 million

4. CBS’ Leslie Moonves at $68 million

5. Liberty Media’s Gregory Maffei at $67 million

6. TransDigm’s Nicholas Howley at $61 million

7. Altice USA’s Dexter Goel at $54 million

8. Time Warner’s Jeffrey Bewkes at $49 million

9. FleetCor Technologies’ Ronald Clarke at $45 million

10. TripAdvisor’s Stephen Kaufer at $43 million

This year is the first time companies had to report “pay ratios”—how the CEO’s compensation compares with the median of other employees—which was required by the 2010 Dodd-Frank banking regulation. But there is no indication that the prospect of those revelations had a dampening effect on CEO pay. The median pay for the 200 best-paid CEOs was up 14% from last year, to $17.5 million.

While the pay ratios are predictably eye-popping—Les Moonves makes 595 times the median CBS worker, and Jeff Bewkes makes 651 times the median Time Warner worker—they also are a fundamentally flawed statistic. Mattel CEO Margo Georgiadis, who has since left the company to run Ancestry, had one of the highest ratios on the list, with Georgiadis making 4,987 times that of the company’s median employee. That’s because Mattel owns its factories overseas, and has thousands of low-paid workers in Asia on its payroll. On the other hand, CEO Herve Hoppenot of Incyte, which outsources its manufacturing, had one of the lowest ratios, at 64 times the median. Not clear to me why outsourcing cheap labor should be prized over insourcing it. You can explore the full list here.

Separately, the Wall Street Journal’s Justin Lahart notes that, despite surveys showing companies plan to put a good chunk of their tax cuts into new investment, the numbers aren’t yet showing it. Friday’s report on durable goods orders–which should reflect any increased investment in equipment—dropped 1.7% in April from a month earlier. It will be an unfortunate outcome if statistics eventually suggest the tax cut boosted CEO pay and shareholder returns, but didn’t lift investment or average wages.

More news below. And if you need a caffeine fix this afternoon, be sure to hit Starbucks before 2 p.m. That’s when the stores will be closing for a half-day bias training session.

Alan Murray

Top News

Italian Turmoil

The collapse of Italy's putative populist government has sent Italian bond yields soaring to their highest level in over four years. U.S. stock futures are down too, thanks to the crisis. Over the weekend, President Sergio Mattarella vetoed the almost-coalition's euroskeptic choice of finance minister, setting the country on course for fresh elections. In the meanwhile, Mattarella has appointed a technocratic, pro-austerity interim government—a move that only plays into the hands of the frustrated League and 5Star Movement parties, who now get to whip up more anti-establishment sentiment. Financial Times

Spanish Turmoil

Over in Spain, early elections may also be the outcome of a no-confidence vote, faced by Prime Minister Mariano Rajoy at the end of this week. Rajoy's right-wing Popular Party (PP) has been hit by a major court ruling over corruption, affecting the party and former officials—29 people have been jailed. The center-right Ciudadanos, a relatively new party that has been riding high in polls, is hoping for early elections by the end of this year. The Local Spain

North Korea

With the summit between North Korea's Kim Jong-un and U.S. President Donald Trump now possibly back on—do keep up—the U.S. has decided to hold off on launching new sanctions against North Korea for the moment. The sanctions were to be announced today, also targeting Russian and Chinese entities. Preparatory pre-summit meetings are taking place in Singapore this week. Wall Street Journal

Apple Screens

Apple is, according to South Korean media, considering putting high-end OLED screens in all its iPhone models as of next year. The bright, sharp screens are currently only found in the top-of-the-range iPhone X, with the rest of the range sporting relatively old-fashioned LCD screens. The news sent the stock of Japan Display, a key supplier of iPhone LCD screens, tumbling by as much as 20% at one point. Fortune

Around the Water Cooler

Coca-Cola Booze

Coca-Cola has launched its first alcoholic product—an alcopop called Lemon-Do, which is initially only available on the Japanese island of Kyushu. Lemon-Do falls into the "Chu-Hi" category of drinks, which mix spirits with flavored carbonated water. Japan is something of a testbed for Coke; it experiments with 100 new products a year there. Fortune

Plastic Ban

The European Commission has proposed the world's biggest ban on single-use plastic products, from straws to cutlery, in order to save the environment (and people) from excessive plastic pollution. If passed, the ban would affect a range of products where affordable, more sustainable alternatives are available—in other words, it's paper straw time. The proposed directive would also hugely step up plastic recycling efforts across the European Union. Fortune

Founder Power

The Wall Street Journal has a piece describing how, in an increasingly flush tech world, more and more venture capitalists are losing their power to "star entrepreneurs" and a new class of investors—mutual and sovereign wealth funds, plus the likes of SoftBank. "The flood of capital…gives entrepreneurs the ability to pick not just their investors but also when and whether to go public," the article notes. WSJ

Storm Cost

Subtropical Storm Alberto killed two journalists in North Carolina yesterday afternoon, after making landfall in Florida. Experts are predicting this year's Atlantic storm season will be "near or above normal." Last year saw 17 named storms, with three major hurricanes landing on U.S. soil—that was well above the average, which involves a dozen named storms in a year. However, while the likelihood is that this year will be better, it only takes one or two large hurricanes to cause immense damage. Two of last year's, Harvey and Irma, counted among the costliest ever. Fox Business

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.