WhatsApp CEO will pay himself a $1 salary like Zuck... but that won't fix America's sickening CEO wage gap
Facebook's acquisition of WhatsApp has finally closed.
Besides giving Facebook access to one of the most popular messaging services in the world, the acquisition will also give WhatsApp chief executive Jan Koum the ability to influence Facebook's future as a member of its board and as leader of its efforts to continue building WhatsApp's brand from outside Facebook's umbrella.
Koum has committed to a $1 salary as a sign of his commitment to Facebook, of which he now owns more than 24,853,468 stock units, and he will not be eligible for company bonuses. The commitment is symbolic for a few reasons -- not least among them being solidarity with Mark Zuckerberg, who also collects a $1 salary -- but also because it shows a large part of the problem with discussing income disparities between workers and CEOs strictly in terms of their salaries.
Few people know just how large the salary gap between a company's workers and its chief executive really is. A study from the Harvard Business School showed in September that many Americans believe that chief executives make about 30-times what the average worker makes; in reality, those company leaders are making 354-times more than their company's employees. (American CEOs are also paid better than their counterparts in every single other country.)
That's an obvious problem in a nation where people have to work multiple jobs just to support themselves and their families -- where a woman working three jobs at multiple Dunkin' Donuts franchises can die because she couldn't sleep anywhere besides her car, where another woman is arrested and fired for allowing her nine-year-old child to play in the park while she worked. The rich keep getting richer while the poor keep getting poorer -- and the rich are doing it by taking disproportionately large amounts of their company's spoils.
But this $1 salary trend isn't the solution to these problems. These chief executives aren't living like paupers; in many cases, they're actually making millions of dollars a year from bonuses, stock sales, and other forms of income. As Pando's David Holmes reported earlier this year:
One might imagine that if there’s one place where CEO-to-worker pay ratios are more reasonable, it’s tech. After all, the fight against outrageous CEO compensation is very much in the spirit of Silicon Valley’s roots. Fairchild Semiconductor, the company that laid so much of the groundwork for how companies were built and structured in the Valley, resisted hierarchy and treated employees and executives alike as equals. Over the years a number of tech CEOs from Elon Musk to Steve Jobs have paid themselves in the single digits for the good of the company.
But just as we saw with Google’s and Apple’s wage collusion schemes, many of the Valley’s biggest companies are beginning to act more and more like the incumbents they sought to replace. Tim Cook’s astonishing CEO-to-worker ratio is only one example. In 2012, eBay’s John Donahoe made 656 times more than his employees. That same year, Oracle’s Larry Ellison, despite having a salary on paper of only one dollar, took home $96.2 million in stock options and other awards, giving him a compensation ratio of 1,287. In Ellison’s defense, these option bonuses mean his take-home pay is indeed tied to the performance of the company. But many experts doubt the efficacy of these pay-for-performance incentives.
Besides looking good on paper and providing tax breaks, these $1 salaries do little to change the disparity between what an average worker brings home and what a company's chief executive takes home in the same year. Most people don't have almost 25 million Facebook shares to sell off whenever it suits their fancy, nor are they always rewarded based on their performance or on the gains their company makes. They're paid a wage, and it just so happens that the wage is almost offensively small when placed in comparison with the money made by a company's leaders.
The argument about income inequality can't begin and end with salaries. There are so many other things that allow rich people to stay that way, even as the poor must fight just to maintain their tenuous grasp on poverty instead of outright homelessness, that the debate must include all forms of compensation, not just a single, easily manipulated number like an annual salary.
[illustration by Brad Jonas]