Back during the height of the novel coronavirus pandemic, online gaming platform and creation system Roblox (NYSE:RBLX) fit almost perfectly in the new normal. But as the global health crisis fades into the rearview mirror, investors are getting down to the financial brass tacks — putting RBLX stock in an uncomfortable light due to executive compensation information that a securities filing revealed.
According to a report from the Wall Street Journal, Roblox co-founder and CEO David Baszucki received a pay package that the gaming firm valued at $233 million last year. That level of compensation puts him “in the ranks of the country’s top-paid chief executives.” Of course, good leaders are worth their weight in gold. However, although this is true, the focus then shifts toward RBLX stock, where the narrative takes a less-than-ideal turn.
Since this report emerged on Monday evening, RBLX stock has dropped about 10%. Additionally, on a year-to-date (YTD) basis, Roblox shares have tanked 56%. And since its first public closing price, RBLX stock is down more than 35%. Such performance — or lack thereof — brings up the debate about whether high-powered executives are paid too much relative to employees down the chain of leadership.
Per a Fortune article, “The median pay for U.S. CEOs is on pace to set a record in 2021, rising an incredible 19% year over year. That’s compared with a paltry 4.7% increase in average hourly earnings for Americans last year. Even worse, average Americans watched their real wages—wages adjusted for inflation—decline 2.6% in February compared with a year ago.”
Meanwhile, the article points out, “nearly one-third of CEOs saw their pay packages increase by at least 25% last year, according to a Wall Street Journal analysis of MyLogIQ data, and only around a quarter of CEOs took a pay cut in 2021 amid the pandemic.”
Still, other research regarding the return on investment on CEO compensation is mixed, according to Harvard Law School. “Prior studies conclude that CEOs are responsible for as little as 4 percent and as much as 36 percent of company performance. Corporate directors estimate that CEOs are responsible for 40 percent of performance.”
Overall, though, one thing does seem clear: if RBLX stock doesn’t start moving up higher and quickly, the rancor regarding the pay-versus-performance debate will likely escalate.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.