At his March meeting with shareholders, Disney CEO Robert Iger faced the usual string of friendly queries about upcoming blockbusters, suggestions for new attractions and a request from a mother about an internship for her film-student son.
Then came a knottier question. Didn’t the Disney boss want to give some hint as to how much he is paid, compared to the average Disney worker? “We really haven’t talked about doing that. No,” Iger said politely. He then turned to less provocative matters, like the fate of future Marvel movies.
Democratic presidential candidate Bernie Sanders may have pushed income inequality to the front of the public policy agenda for much of America, but in Hollywood, the topic remains on the periphery. For now. Beginning with the 2017 fiscal year, though, the entertainment industry will join the rest of corporate America in reporting what CEOs are paid and how that compares with their workers. Under Securities and Exchange Commission rules approved last year, each company will produce the ratio of CEO compensation to median worker pay.
The results could be eye-popping, based on figures produced for Variety by two firms that track executive and worker pay. The ratio of CEO to median worker pay stood at 20-to-1 in 1965, and had ballooned to more than 300-to-1 by 2014, according to the labor-affiliated Economic Policy Institute. But the prominent companies measured by compensation research firms PayScale and Equilar are paying the boss much, much more than the average worker. Some of the ratios of CEO-to-worker pay are as high as 900-to-1.
The yawning pay gaps could cause particular consternation at a company like Viacom, where chief Philippe Dauman got $54.1 million in 2015, even as television subscribers have been slipping away and Paramount has swooned to last place in market share among the Big Six studios. And the wage chasm has only increased in recent years, as average CEO compensation for all companies climbed to $16.3 million by 2014, a nearly 1,000% increase since 1978, compared with a 10.9% hike for the average worker, when adjusted for inflation, the Economic Policy Institute study found.
|Rupert Murdoch, Philippe Dauman and Leslie Moonves significantly out-earn the average worker at Fox, Viacom and CBS Corp. Rex Shutterstock|
Entertainment and media company bosses are prominent on the list of the most lavishly paid. Corporate responsibility watchdog As You Sow last year put four media titans among the top 15 “Most Overpaid CEOs,” led by Discovery’s David Zaslav and including Iger, Dauman and CBS’ Leslie Moonves. (Zaslav’s total compensation dropped substantially from 2014 to 2015 — from more than $156 million to $32.4 million, given the absence of giant stock awards and options.)
The overall pay figures reported here were obtained from Equilar (updated by Variety with recent proxy statements for some companies), while PayScale provided the median pay estimates. PayScale has collected 40 million salary profiles and normalized that data through proprietary algorithms before comparing findings with other, external data sources. PayScale acknowledges that its system, relying on workers to fill out voluntary online surveys, under-represents the lowest-wage workers. Some believe this would tend to overstate the median wage estimate for companies like Disney, which employs a large number of low-wage workers in its theme parks.
|Management consultant Peter Drucker wrote in 1984 that chief executives should be paid no more than 20 times as much as the average worker, to promote teamwork, among other goals. Media and entertainment executives commonly earn hundreds of times more than their median employees. SOURCE: CEO compensation figures for 2014/2015 from Equilar and most recent company proxy statements. Median worker pay, estimated by PayScale, does not include stock/option grants to employees, and tends to under-represent low-wage workers|
Variety asked each of the companies/CEOs cited whether they wanted to comment on the figures or on the notion that there is a meaningful nexus between what the boss and employees get paid. None of the seven companies, or their chief executives, responded.
At the March company gathering, Iger told shareholders that Disney treats workers “very fairly.” He noted an absence of labor strife and said the company works hard “to maintain … competitiveness when it comes to not only how we compensate our employees but the conditions that they work under and the opportunities they are given.” He also acknowledged that Disney would follow the SEC rules on reporting CEO vs. median worker pay.
The SEC’s move to impose pay ratio reporting prompted furious debate before the commission narrowly approved the rule on a 3-2 vote. Most business groups decried the regulation, saying it would cost a cumulative $1.3 billion in the first year for all companies to ferret out the correct figures, and $526 million annually each year after that.
|“The [SEC-mandated pay ratio reporting will exist] for purely populist reasons and to get attention from the press. But for investors who it’s supposed to help, there is zero new information.”|
|Steve Kaplan, professor of finance|
And for what purpose? Proxy statements already require full disclosure of CEO compensation. “The information will be there for purely populist reasons and to get attention from the press,” says Steve Kaplan, a University of Chicago finance professor and expert on compensation. “But for investors who it’s supposed to help, there is zero new information.”
Progressives have argued that more attention is needed to close the growing gap in the U.S. that French economist Thomas Piketty has said is “probably higher than in any other society at any time in the past, anywhere in the world.”
The “say-on-pay” provision in the 2010 Dodd-Frank reform legislation requires companies to give shareholders a vote on CEO compensation. And some large institutional investors are trying to stake out a more aggressive stance.
Anne Simpson, a senior portfolio manager for the California Public Employees Retirement System, argued in favor of the pay-ratio reporting when the issue came before the SEC. “We believe the ratio will be a number that prompts commentary and discussion,” she said, “providing an important data point to inform a wider discussion on value and risk.”
Asked why Hollywood, in particular, pays its leaders so much, Rosanna Landis Weaver, the creator of As You Sow’s most overpaid list, says she can’t be sure. “But it is something other than good corporate governance,” she observes. “Maybe it’s a sort of star culture.”
For more for from Variety’s Politics and Hollywood issue, click here.