Good morning. David Meyer here, filling in for Alan from Berlin.
Last year was the first in which publicly traded companies in the U.S. were obliged to disclose their CEO pay ratios. The numbers are in and, while quite a few CEOs were shown to be earning hundreds or thousands of times what their companies’ median employees earn—per Equilar, the median CEO pay ratio was 254:1—one chief executive’s ratio stuck out like a sore thumb.
Step up, Elon Musk.
In 2018, the Tesla chief was paid an astonishing 40,668 times more than the earnings of the median Tesla worker. In theory, at least.
The reality is somewhat more complex, as Tesla had to report a comparison of Musk’s $2.28 billion in stock options with that median worker’s $56,163 pay for the year. Musk only gets to claim that cash if the company hits high valuation and operational targets—if Tesla misses all the targets, he gets zilch.
Musk’s case is an outlier, but there is a trend of some of the highest ratios being the result of similar factors. For example, as reported by the Financial Times, Oracle co-CEOs Safra Catz and Mark Hurd took home $108 million each in 2018, creating a ratio of 1,205:1. But that includes five years of stock option grants, without which the ratio would have been 282:1.
Either way, though, these ratios are high and they’re maybe getting higher—in 2017, when only two-thirds of companies whose filings were surveyed by Equilar reported their CEO pay ratio, the median stood at 235:1.
Unions and Democratic presidential candidates will no doubt seize on the disparities as evidence of widening inequality. That’s not hard to do when, for example, Whirlpool CEO Marc Bitzer earns $11.8 million in a year and the median Whirlpool employee gets $20,485. That’s a 578:1 ratio, and remember that the median employee is by definition in the middle of the pack, and not one of the company’s lower-paid workers.
Whatever your view of how these figures are calculated and whether their forced disclosure is fair or not, they are politically toxic in this day and age.
More news below.
Terry Gou, Foxconn’s chairman, is to withdraw from the contract manufacturing giant’s daily operations as he mulls a run for president of Taiwan. The election is next year. Gou is Taiwan’s richest person, and a lot of his wealth is tied up in China—a fact that has some observers worried about the implications of Gou becoming Taiwan’s president. Reuters
AT&T and Hulu
AT&T has sold its Hulu stake back to Hulu for $1.4 billion, meaning Disney now controls two-thirds of the streaming service (the rest is Comcast’s.) Hulu is now valued at $15 billion. The Verge foresees a future where Hulu acts as a complement to the new Disney+ service, perhaps offering more mature content, but leaving consumers without the cross-network content they’re used to. The Verge
Special Counsel Robert Mueller’s report into links between the Trump campaign and Russia will be released Thursday, in redacted form. So far, all we have are the conclusions as interpreted by Attorney General William Barr; now we will get to see the underlying facts and legal analysis. Meanwhile, House Democrats investigating President Trump’s finances have subpoenaed Deutsche Bank and several other banks. NPR
French fire officials say Notre Dame’s structure has been saved despite the fire that destroyed its roof and caused extensive damage within the 12th-century Gothic cathedral. The fire may have been caused by renovation works. President Emmanuel Macron has deemed the disaster a national emergency and has vowed to rebuild the cathedral. CNBC
Around the Water Cooler
Elon Musk’s SpaceX is raising another $500 million in funding, four months after raking in a similar amount. The new cash could help SpaceX speed up development of its Starlink satellite Internet business, which is supposed to support the company’s bottom line in the future, but questions are being asked internally about how viable the Starlink constellation would actually be. Wall Street Journal
The Italian banking giant UniCredit will pay $1.3 billion to settle a six-year sanction-busting probe in the U.S. UniCredit’s German unit has also pleaded guilty to helping sanctioned entities including Iran’s IRISL shipping company to access the U.S. financial system. Reuters
If any British lawmakers think there’s a possibility of getting yet another Brexit extension after the current one runs out on Halloween, they had better think again. Germany’s foreign minister has warned that “you cannot drag out Brexit for a decade,” indicating that the country will probably side with France’s hardline position should the U.K. seek a further extension. Financial Times
Many Democratic candidates are swearing off donations from political action committees (PACs,) but what does that mean in practice? As Natasha Bach writes for Fortune, corporate PACs were unlikely to give those candidates much money anyway, and can still donate to the Democratic Party as a whole. Elizabeth Warren, however, has also said she won’t attend high-dollar fundraisers and so on in order to provide “equal access”—and that’s a meaningful move. Fortune