CEO pay at levels not seen since the Gilded Age: Expert

Tesla (TSLA) shareholders voted to approve CEO Elon Musk's massive pay package, valued at $46 billion based on the company's current stock price. Musk's next battle will be convincing a Delaware judge to ratify the compensation package after a Delaware judge struck the original 2018 pay package down earlier this year.

This victory marks yet another chief executive who has defied the odds and are pushing the boundaries of their own compensation parameters.

Fletcher School of Law and Diplomacy Lecturer Gautam Mukunda sits down with Yahoo Finance to discuss the massive growth and shifts in CEO pay, which he describes at being levels not seen since the Second Industrial Revolution in the late 19th Century.

"The Gilded Age was followed by an age of the Progressive ERA, ages of reform, when you are in the United States, where median income has basically stagnated for about 45 years, I think people are going to push back and say, does it make a lot of sense for however valuable you might think a CEO is?" the Picking Presidents Author asks, later adding: "It would not be surprising for society to push on that and say, well, it is time for there to be a reform movement to get this under, to get this rebalanced in a way that's healthier for the rest of us."

Referring to Musk's own pay package at Tesla, Mukunda plainly states: "Presumably, if he asks for a bigger one, he's going to have to generate the same kind of returns that he did before. Given Tesla's current market cap, it's in almost half $1 trillion."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Luke Carberry Mogan.

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Video transcript

These pay packages and compensation.

They're just, they're, they're amazing.

Go I mean, we we can talk about, you know, Elon Musk and that pay package, you know, Larry Ellison, who is friends with Elon Musk Forbes saying his net worth jumped 15 billion.

Is that what it just jumped?

15 billion is oracle of course, hit an all time high this week.

It's just, I'm just jaw dropping numbers go with them.

Have we ever seen a moment in time like this before?

With this kind of with these kind of numbers?

Probably the uh so this kind of numbers.

No, because you have to correct for inflation, right?

But correcting for inflation, the parallel would be the gilded age.

I'll just know for example that when standard oil was at its peak, if you correct for inflation, John D Rockefeller had an income, not a wealth and income, well, in excess of $20 billion a year, right.

Sort of even Elon Musk would go, wow, that is a lot of fun.

It's good to be the king.

Yeah, it's good to be the king.

Yeah, especially what um so we have seen eras like this but right, what's worth noting is when we see eras like this, there is always a correction, right?

The gilded age was followed by an age of the progressive era, ages of reform when you are in the United States where median income has basically stagnated for about 45 years.

I think people are gonna push back and say, does it make a lot of sense for however valuable you might think a CEO is, they're probably so, you know, let's put this in context.

Um I think the top five hedge fund managers got paid more than every public school teacher in the United States combined.

Ok.

So you can believe that hedge funds are amazing.

You can believe they're valuable.

You can believe that these are the five greatest investors who've ever lived.

And I would still say that the value they created for the economy is not as much as the entire American public school system put together that is not a plausible order.

And so it would not be surprising for society to push on that and say it is time for there to be a reform movement to get this under to to get this rebalance in a way that's healthier for the rest of us and the council I give to all of the, all of these people is like if you push the system too far, it will break in ways that you do not like, right, you are better off leading by pushing reform and saying, let's make life better for everybody than you are pushing the system to its limits.

So Gotham, um, is this the top, was this Elon pay package the top or the one that he's about to get?

Maybe if he asks for even a bigger one, is that the tipping point?

Well, presumably if he asks for a bigger one, he's gonna have to like generate the same kind of returns that he has that he did before.

Given Tesla's current Mar market cap right in the, in almost half a trillion dollars, doing another 10 X gets you into a set of a set of calculations about where its valuation comes from.

But that's a stretch, right?

That's gonna be hard to do.

It's gonna be even even for Elon Musk, that's a big one.

What I would say is, I don't know where the breaking point will come because it'll be too like, it will take us all by surprise, but you can tell that it is coming, right?

The United States is currently consumed by a gigantic populist revolt.

Some parts of that are clearly about income inequality, even if it has manifested in the role of a political candidate who's, you know, I just got away from promising CEO S that he was going to cut their taxes just a couple of days ago.

Um There are gonna be responses to this and we should really be thinking about how to channel that in a way that's productive and not unproductive for society.

Um, if I were Elon Musk, I would sort of be saying, like I have done the impossible, right.

Which there's, you know, like give him credit.

He has done the impossible with his companies.

But my, when we look at again, think back to John D Rockefeller, he was the most hated man in America when he was the wealthiest.

Right.

What he did to rebuild his reputation was to create the Rockefeller Foundation and sort of distribute that wealth to the people in ways that were, that left, completely transformed his legacy.

Um I think, well, I personally am a huge fan of the space business.

I think that Elon's goal of like building out the space industry is laudable.

I suspect that's not gonna be enough given his other behaviors and the way, the way in which he's alienating a lot of people.