Despite his reputation as a frugal, shareholder-focused operator, John Malone has a pattern of significantly overcompensating executives at his companies like Warner Bros. Discovery. This practice raises questions about his alignment with common shareholders and contrasts with his public persona of "eating his own cooking."
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The common fear of overpaying for top talent is misplaced. No company fails because it paid its extraordinary performers too much. The true path to financial ruin is overpaying average or mediocre employees, as this creates a bloated, unproductive cost structure that kills the business.
Unlike shares purchased with personal capital, stock options are often treated like "house money." This incentivizes CEOs to make excessively risky bets with shareholder capital because they capture all the upside but are not punished for failure, leading to poor capital allocation.
Incentive plans like Elon Musk's, requiring 10x stock growth for a payout, are culturally and practically impossible in mature industries. A CEO at a company like Target would never accept such a high-risk structure, highlighting the vastly different growth expectations between tech and traditional businesses.
Proxy advisory firms ISS and Glass Lewis, which hold immense influence over index fund votes, are recommending against Musk's pay package. These are the same organizations that have been the primary drivers of DEI and ESG mandates in corporate America, illustrating their broad power.
The court nullified Elon Musk's Tesla pay package not because of its size, but because it was a 'conflicted transaction' that wasn't properly 'cleansed.' The board members deciding the pay were not truly independent of Musk, and shareholders weren't fully informed, leaving no impartial decision-maker in the process.
Public companies, beholden to quarterly earnings, often behave like "psychopaths," optimizing for short-term metrics at the expense of customer relationships. In contrast, founder-led or family-owned firms can invest in long-term customer value, leading to more sustainable success.
A study found that CEOs trained to prioritize shareholder value deliver short-term returns by suppressing employee pay. This practice drives away high-skilled workers and cripples the company's long-term outlook, all without evidence of actually increasing sales, productivity, or investment.
CEOs are often exceptional at building relationships, which can co-opt a board of directors. Directors become friends, lose objectivity, and avoid tough conversations about performance or succession, ultimately failing in their governance duties because they "just want them to win."
Despite poor performance, CEO David Zaslav skillfully navigated a bidding war between Netflix and Paramount. By positioning Warner Bros. as a must-have asset in the streaming wars, he drove the acquisition price from $8 to $30 per share, securing a billionaire outcome for himself regardless of the winner.
Don't expect corporate America to be a bulwark for democracy. The vast and growing wealth gap creates an overwhelming incentive for CEOs to align with authoritarians who offer a direct path to personal enrichment through cronyism, overriding any commitment to democratic principles.
