Mashable claims that “So perhaps it shouldn’t come as much of a surprise that GoPro would pay pretty much any amount of money to ensure that the CEO is happy and engaged.” Let’s take a look.
Woodman received 4.5 million restricted stock units worth $284.5 million as of the end of 2014, earning him the title of highest paid CEO in the U.S., according to the new Bloomberg Pay Index.
That sounds official and mathematical. Is it true?
Here is how that grant worked. Woodman got the grant in June 2014. GoPro did not hand him a $284.5 million wad of cash. It handed him shares as part of an employment contract, of which only 1.5 million were actually his at the time (still a lot, but not nearly what Mashable claimed). He can get the rest, but only if the stock price hits its targets and he continues working there. The price targets are $34.03/share and $44.24/share. That would be 42% and 84%, respectively, higher than the $24/share IPO price.
It was a rich deal for the founder and key employee of what became a very valuable company ($5.9 billion market cap as of this writing). Some people may refer to this “aligning management’s interests with those of the shareholders.” Nobody would honestly say he “makes $284 million a year.”
A Young Socialist-backed proposal to limit executive pay to twelve times the pay of junior employees was voted down by Swiss voters by a vote of 65 percent. The executive pay limits far exceed the disclosure-based limitations of Dodd-Frank and SEC regulations.
According to the Bloomberg article, at least five of Europe’s highest paid execs are in Switzerland.
The leader of the Young Socialist party vowed to continue the fight to:
Send Swiss companies fleeing to other jurisdictions
Severely water down the talent pool willing to work in Switzerland or for a Swiss business
Turn the pool of executives working for Swiss companies into easy prey for headhunters in competing companies in other countries
Make Switzerland toxic to anyone who wants to start a business and hire employees
There may be constraints on UBS leaving Switzerland, but you can bet its CEO (or those talented enough to be in line for executive positions) has plenty of means of escape from this sort of income restriction. However, do you think Glencore (giant international commodities trading firm) can’t structure its business away from these restrictions?
These are the types of consequences that result from navel gazing over “income equality” and generally looking to more successful people with envy and anger rather than looking to more successful people and trying to learn about how to become successful.