10 Companies Making Their CEOs Rich

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stock buybacks - 10 Companies Making Their CEOs Rich

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The headline “The Stock-Buyback Swindle” says it all. 

The Atlantic magazine’s August issue had a story about how American companies are spending trillions on stock buybacks to enrich their CEOs. Much of the article’s content has been covered extensively by business media — both the pros and cons — so I won’t rehash the arguments. However, one of author Jerry Useem’s paragraphs bears repeating because it hits at the core of the problem.

“Corporations describe the practice as an efficient way to return money to shareholders,” Useem wrote. “By reducing the number of shares outstanding in the market, a buyback lifts the price of each remaining share. But that spike is often short-lived: A study by the research firm Fortuna Advisors found that, five years out, the stocks of companies that engaged in heavy buybacks performed worse for shareholders than the stocks of companies that didn’t.”

I’ve always believed that if a company wants to allocate its free cash flow to shareholders, it should do so by paying a special dividend, not by repurchasing shares or paying a regular dividend. 

Stock buybacks distort earnings growth while regular quarterly dividends ratchet up shareholder expectations. Neither is good for the long-term health of a business. But it’s especially galling when stock buybacks enrich a CEO at the expense of the rank-and-file employees.

Love them or hate them, these 10 companies are making their CEOs rich.

Stock Buybacks Making CEOs Rich: Oracle (ORCL)

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According to the Equilar 200 study, Oracle (NASDAQ:ORCL) co-CEOs Mark Hurd and Safra Catz earned a combined $298 million in total compensation in fiscal 2017 and 2018, of which approximately 96% came from stock grants and option awards. 

In 2018, Hurd and Catz were paid 1,205 times the company’s median pay of $89,887

As a tandem, Hurd and Catz own 49.7 million shares, which are worth $2.7 billion at current prices. The duo’s compensation in 2017 and 2018 fails to take into consideration the amount paid through vested shares. Catz received $158 million in shares that vested in fiscal 2018 alone. 

As for share repurchases, the company repurchased $51 billion of its stock over the past three fiscal years, reducing its share count by 14%. Not surprisingly, its earnings per share increased by 43% over the same period. 

JPMorgan (JPM)

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JPMorgan (NYSE:JPM) CEO James Dimon earned $58 million in total compensation in fiscal 2017 and 2018, approximately 77% of it from stock grants. 

In 2018, Dimon was paid 381 times the company’s median pay of $78,923.

Dimon owns 10 million shares if you include options, which are worth $1.2 billion at current prices. In 2018 alone, the JPMorgan CEO had $11 million in stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $44.5 billion of its stock over the past three fiscal years, reducing its share count by 10%

JPMorgan increased its earnings per share by 50% over the same period. 

Microsoft (MSFT)

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Microsoft (NASDAQ:MSFT) CEO Satya Nadella earned $46 million in total compensation in fiscal 2017 and 2018, approximately 61% of it from stock grants and option awards. 

In 2018, Nadella was paid a relatively reasonable 154 times the company’s median pay of $167,689.

Nadella owns 2.9 million shares if you include options, which are worth $393.6 million at current prices. In 2018 alone, Nadella had $25.8 million in Microsoft stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $42 billion of its stock over the past three fiscal years, reducing its share count by 3%. That’s not surprising given how much stock the company issues to employees for a job well done. 

Microsoft managed to increase its earnings per share by 98% over the same period. 

Merck (MRK)

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Merck (NYSE:MRK) CEO Kenneth Frazier earned $38 million in total compensation in fiscal 2017 and 2018, approximately 68% of it from stock grants and option awards. 

In 2018, Frazier was paid 215 times the company’s median pay of $82,173.

Frazier owns 3.7 million shares if you include options, which are worth $307.5 million at current prices. In 2018 alone, the Merck CEO had $41.3 million in stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $16.5 billion of its stock over the past three fiscal years, reducing its share count by 6%

Merck managed to increase its earnings per share by 49% over the same period. However, its GAAP results have been very choppy over the past decade. You’ll want to take this with a grain of salt.  

Apple (AAPL)

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According to the 2018 version of the Equilar 200, a list of the 200 highest-paid CEOs in America, Apple (NASDAQ:AAPL) CEO Tim Cook made $29 million in total compensation in fiscal 2017 and 2018, none of it from stock grants or options.     

In 2018, Cook was paid 283 times the company’s median pay of $55,426. 

However, one needn’t feel sorry for Cook. He owns 878,425 shares of Apple stock worth $198 million as (as of Sept. 12). In addition, Cook has had more than a million shares of AAPL stock vest in the last two years alone. This means his compensation for 2017 and 2018 was actually much higher than $29 million. 

As for share repurchases, the company repurchased $135.3 billion of its stock over the past three fiscal years, reducing its share count by 14%. Not surprisingly, its earnings per share increased by 29% over the same period. 

Bank of America (BAC)

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Bank of America (NYSE:BAC) CEO Brian Moynihan earned $43 million in total compensation in fiscal 2017 and 2018, approximately 93% of it from stock grants and option awards. 

In 2018, Moynihan was paid 247 times the company’s median pay of $92,040.

Moynihan owns 3.4 million shares if you include options, which are worth $100.9 million at current prices. In 2018 alone, Moynihan had $23.1 million in stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $38 billion of its stock over the past three fiscal years, reducing its share count by 9%

Bank of America increased its earnings per share by 99% over the same period.  

eBay (EBAY)

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eBay (NASDAQ:EBAY) CEO Devin Wenig earned $36 million in total compensation in fiscal 2017 and 2018, approximately 82% of it from stock grants and option awards. 

In 2018, Wenig was paid a 152 times the company’s median pay of $119,562.

Wenig owns 1.7 million shares if you include options, which are worth $67.5 million at current prices. In 2018, Wenig had $18.8 million in eBay stock vest on top of his total compensation.  

As for share repurchases, the company repurchased $10.1 billion of its stock over the past three fiscal years, reducing its share count by 19%

eBay increased its earnings per share by 80% over the same period.  

Qualcomm (QCOM)

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Qualcomm (NASDAQ:QCOM) CEO Steven Mollenkopf earned $32 million in total compensation in fiscal 2017 and 2018, approximately 75% of it from stock grants and option awards. 

In 2018, Mollenkopf was paid a 233 times the company’s median pay of $85,592.

Mollenkopf owns 679,813 shares if you include options, which are worth $53.8 million at current prices. In 2018 alone, the CEO had $12.9 million in stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $27.8 billion of its stock over the past three fiscal years, reducing its share count by 11%

Qualcomm decreased its earnings per share by 203% over the same period. On a non-GAAP basis, it decreased earnings per share by 21%.     

Pfizer (PFE)

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Pfizer (NYSE:PFE) CEO Ian Read earned $46 million in total compensation in fiscal 2017 and 2018, approximately 76% of it from stock grants and option awards. In January 2019, Read passed down the company to Albert Bourla after eight years at Pfizer’s helm. 

In 2018, Read was paid 244 times the company’s median pay of $80,011.

Read owns 1.3 million shares if you include options, which are worth $48.5 million at current prices. In 2018 alone, Read had $10.6 million in stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $22.2 billion of its stock over the past three fiscal years, reducing its share count by 5%

Pfizer increased its earnings per share by 68% over the same period.  

Cisco (CSCO)

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Cisco (NASDAQ:CSCO) CEO Charles Robbins earned $38 million in total compensation in fiscal 2017 and 2018, approximately 73% of it from stock grants and option awards. 

In 2018, Robbins was paid 160 times the company’s median pay of $132,764, the second-highest median pay (behind Microsoft) of the 10 stocks listed in this article.  

Robbins owns 139,189 shares if you include options, which are worth $6.9 million at current prices. Of the CEOs on this list, Robbins has the smallest ownership position in terms of total dollars in stock held. In 2018, Robbins had $9 million in stock vest on top of his total compensation for the year.  

As for share repurchases, the company repurchased $41.9 billion of its stock over the past three fiscal years, reducing its share count by 13%

Cisco increased its earnings per share by 24% over the same period.  

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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