CEO Pay: A Discussion (with a Twist)

Presuming all goes according to plan, ballots will be tallied sometime today to determine if Tesla shareholders agree that company founder and CEO, Elon Musk, should receive what is now the $56 billion payday the Board agreed to pay him back in 2018.

It's worth noting that the outcome of the shareholder vote will do nothing with regards to the January 2024 ruling by a Delaware judge invalidating the past due compensation as being unfair to shareholders.

Nevertheless, this entire kerfuffle regarding how much Musk is worth to Tesla (let alone to its shareholders), got me thinking.

So ... a few weeks ago I decided to turn to LinkedIn to conduct a very unscientific Poll to determine what level of compensation individuals thought was appropriate for an organization's Chief Executive.

Here is how I crafted this Poll.

The question I asked was this:

A CEO is running a successful $450MM firm. What's an appropriate level of pay? NOTE: Your vote (comments) are very important. Thanks. David

The four possible answers I offered were:

1. Under $150K (and benefits)
2. $150K to $199K (and benefits)
3. $200K to $299K (and benefits)
4. Over $300K (and benefits)

{NOTE: LinkedIn only allows four possible answers, so it's impossible to have a midpoint unless you only offer three answers, which I did not want to do.}

When I shared this Poll on my LinkedIn feed (on Thursday, 23 May 2024, if memory serves me correctly), this is the description I used to introduce it to Followers, Connections, and strangers:

I'm working on a story idea for Utah Money Watch about CEO pay, so your votes on this 3-day poll will be critically important. And your comments too. AND ... please share & repost this too. Thanks!!! 🔥🔥🔥David

{A CONTEXTUAL NOTE: As of last night, I have 8,906 Followers and 8,124 Connections on LinkedIn — not insignificant, surely, but not massive either.}

By way of background, after I published this Poll on LinkedIn, I "tagged" close to 90 real-life and digital-only friends, Followers and Connections in three separate Comments I tied to the Poll, all in an effort to hopefully give the Poll a bit of a boost with LinkedIn's algorithms.

And the results? In total, this Poll garnered

• 3,853 Impressions,

• 2,036 Unique Views,

• 240 Votes,

• 41 Comments (including my Replies and 4 "tagging" Comments),

• 2 Reposts, with

• 57.8% of the audience coming from the Salt Lake Metro area (no other geographic region represented more than 3%).

• Individuals who participated in the Poll worked in such industries as
  — Software Development (14.7%),
  — Advertising Services (10.0%),
  — IT Services and IT Consulting (7.0%),
  — Financial Services (6.2%), and
  — Business Consulting and Services (4.4%), with

• The most common job titles being
  — Founder (7.3%),
  — Chief Executive Officer (4.5%),
  — President (4.1%),
  — Co-Founder (3.9%), and
  — Owner (3.4%).

Yes, over 23% of the Poll respondents were among the "top dogs" of their respective firms. Interesting, huh?

So How Did They Vote? And What Did They Say?

If you're interested, you can see this Poll as I shared it on my LinkedIn Profile here.

But for those that don't want to bother, here's the image captured last night from my feed.

Yup, an overwhelming 83% of all Poll participants felt that a CEO running a successful firm with $450 million in revenue should be paid over $300,000 in annual pay (plus benefits), while

• 14% of participants felt an annual pay range of $200,000 to $299,000 was appropriate (with benefits);
• 2% of participants felt annual pay of under $150,000 was appropriate (with benefits); and
• 1% of participants felt an annual pay range of $150,000 to $199,000 was appropriate (with benefits).

Comment-wise, some thoughts from the Poll participants were quite insightful.

Take for instance Jim Steadman, Chief Growth Officer for West Jordan, Utah-based X3 Tradesman, who wrote:

"Without clarity of what benefits are offered makes it tough to be clear on what a total package should look like. However, this is a significant size company that would need a strong operator and an even stronger leader to be the visionary to guide and inspire the employees to continue to grow."

Brad Bertoch, Co-Founder, Trustee, and former CEO of nonprofit Kinect Capital took this approach with his response:

"What is the stock option package, and how is the incentive package measured by the board, margin, profitability, cash flow, head count? A company fitting your profile had reasonable cash compensation but it appeared unreasonable stock awards. Also, the Board comp needs to be aligned with shareholder expectations not senior managements desires. Too often the CEO controls the Board to control his/her compensation."

Conversely, multi-time marketing executive, and current Adjunct Professor at Utah Valley University and Go-to-Market Advisor, Joe Staples, gave this response:

"I believe $300k is low. $450m is a sizable business. CEO comp for a role like this in the tech space would be $500k-$750k for a skilled chief."

Similarly, Denmark Francisco (CMO of Tampa, Florida-based Blackbox) wrote:

"i know a CEO who got paid $8M/year at $225M (in annual revenue)."

Francisco went on to clarify that this CEO took that unnamed firm from zero revenue to over $400 million in ARR (Annual Recurring Revenue).

And then there's Tod Hansmann, Principal Software Engineer and Team Lead at Lehi, Utah-based Matthews Real Estate Investment Services, who wrote:

"If the CEO is integral to the success of the business (and they should be) they should have an integral amount of the fruits of that success. How you slice it is negotiation, but $300K for that revenue is nothing."

Finally, in contrast, there's also Phoenix Roberts, a Ghostwriter with Midvale, Utah-based Baron Phoenix Media, who added:

"I think a CEO should have a reasonable but fairly small salary plus a percentage of profits. Gives them an incentive to perform."

To be clear, these are not all of the comments shared on/with this Poll.

But, to be honest, the Comments shared by some of the Poll participants are about what I expected, especially in light of the "voting results" from the Poll itself.

Now Here's the Twist.

What if that Top Leader's Title Wasn't CEO?

What if the Actual Title was Mayor?

And What if the $450 Million Actually Referred to an Annual Budget and Not Annual Revenue?

Here's the context that led me to the questions shown above in the subheads.

To be clear, Yes, I was aware that Tesla's shareholders were going to be asked to vote in today's Annual Meeting as to whether or not Founder and CEO, Elon Musk, should receive the massive payday (tied to stock grants) as per the 2018 agreement between Musk and the company.

On 7 May 2024, some two weeks before I launched this LinkedIn Poll, Salt Lake City Mayor Erin Mendenhall presented her recommended Fiscal 2024/2025 Salt Lake City Budget to the members of the City Council.

And given that it was a hefty 340-page document, it obviously took a bit of digging for intrepid individuals, researchers, and journalists to make it through the encyclopedia-sized tome.

But on 22 May 2024, the Salt Lake Tribune published this story — Salt Lake City mayor proposes nearly $44K salary increase — for herself — that reported the new budget, if approved, would

"... (raise) her annual salary from $168,067 to $211,765."

Not surprisingly, the pandemonium from citizens decrying such an egregious overreach was deafening.

As expected, all of the other major news outlets in Utah/Salt Lake City also jumped on this news story.

However, as reported in the KSL.com story the evening of May 22 (Salt Lake City budget proposal includes raises for mayor, City Council),

• The base pay for Mayor Erin Mendenhall "... falls at No. 28 among city leaders across Utah"
• Additionally, "The proposed increase would bring the mayor's pay to ninth among Salt Lake City's own cabinet and to ninth among other city leaders in Utah ..."

Additionally, SLC's proposed FY 2024-2025 budget also added a new employee within the Office of the Mayor, a Senior Advisor, with a proposed salary of $216,420.

What?!?!?!

Someone who reports to Mayor Mendenhall would actually make more money than she does???

That's outlandish!!!

A Confession

If you haven't figured it out by now, when I first stumbled across the Tribune story, and then the stories from the other local media outlets, I was shocked.

And perplexed.

And, to be honest, a bit saddened.

From my perspective, a salary of $211,000 is nothing for someone responsible for an annual budget of $475 million.

To be clear, I would strongly argue, that budgetary separations notwithstanding, eventually every department and division within the Salt Lake City "ecosystem" flows up to and through Mayor Mendenhall.

So when people say — "The buck stops here" — when you're referring to Salt Lake City (or any municipality, for that matter), that phrase actually means that essentially the total/complete budget for that governmental entity is eventually the responsibility of the top executive, whether she/he be the mayor or the city/county manager.

And taken from that perspective, Mayor Mendenhall is actually "Buck Stops Here" responsible more than $2 billion in annual spending.

Case in point, the Salt Lake Airport budget alone is $560 million.

And Bill Wyatt, Director of Airports for Salt Lake City Corporation, is not the "end all, be all" self-appointed ruler of airports for Salt Lake City.

He reports to Mayor Mendenhall, much like a General Manager or Division President does within a corporation.

And let's be clear, Mayor Mendenhall is the person who gets to decide if Wyatt keeps his job or not.

Not the City Council.

Not the citizens of Salt Lake City.

The Mayor.

And, essentially, the same is true for everyone who works for Salt Lake City, in any department, in any division.

Now, I get that there is this overarching sentiment within many (if not most) citizens of our fair country that have adopted a belief that it is a privilege to serve in local, regional, or national government service.

And for the most part, I agree, especially for those who choose to run for elected office.

And as an elected official, it's the citizens that decide if/when he/she should be fired or for how long they should stay in office.

That being the case, does that mean that such elected officials should be underpaid in comparison to their peers in the business community?

And I get the fact that in some instances, elected officials, like mayors, end up with other compensation beyond their salaries, like free or subsidized transportation, travel, security details, etc.

But let's also make no mistake about it:

With a current salary of $168,000, Salt Lake City Mayor Erin Mendenhall is grossly underpaid!

Don't believe me? Fine.

Then go to the EDGAR system within the U.S. Securities and Exchange Commission website and look up the annual pay package for the CEO of any publicly traded company, anywhere, but especially a firm headquartered within Utah.

What you'll want to look for are the Annual Reports of these firms, most of which will be noted as forms 10-K.

I'm quite confident that if you do what you will find is that almost without exception, each are making substantially more than $211,000 ... especially if you add in the bonuses, stock options and other side payments (assuming that you check on any firm with revenue of $100 million or more).

{AUTHOR'S NOTE: I just did this for three Utah-based, publicly traded firms. And without naming the organizations, the CEO's compensation alone came in at

• {$269,000, 99.1% salary};
• {$2.71 million, 20.1% salary; and
• {Nearly $13.5 million, 5.2% in salary.}

In case you're not sure of my position on this, let's be clear:

Stop whining, and give Mayor Mendenhall her proposed pay raise.

AUTHOR'S NOTE: Although I have met Mayor Mendenhall on a number of occasions in the past, we are not friends, nor do I have any other ties to her or her family.

I also do not live in Salt Lake City, so I have zero ability to vote for or against her in the next city election.

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