U.S. shareholders generally agree that leadership is best measured by stock price. That philosophy underpins most pay-for-performance systems. (The say-on-pay provisions and other elements of the Dodd-Frank Act were mainly intended to avert a bias for short-term gains over long-term value.) 

That U.S. public company CEOs now make nearly 200 times more than the average U.S. worker—and multiples more than peers in other countries—reflects this emphasis on equity-based incentives. U.S. base salaries and even short-term incentive bonuses are on par with other nations. Tesla hasn’t paid Musk a salary since 2019. The mammoth upside comes from stock options. That’s why George David, the then CEO of United Technologies Corp., could truthfully tell me “I’m in the middle of my peer group” the year he took home $70 million in pay.  

There’s nothing wrong with incentivizing leaders to build long-term value. The question is whether it’s necessary to pay so much. People tend to judge their wealth relative to their peers, which may be why CEOs in the U.K. are now pushing for U.S.-level compensation. They see their U.S. industry counterparts getting vastly higher rewards for delivering similar results—just look at the oil and gas industry—and think it’s not fair. In the case of former Nissan Renault CEO Carlos Ghosn, the resentment over pay gaps ran so deep that it reportedly clouded his judgement. 

There’s no easy answer here. Investors hate to rock the boat when their fortunes are rising, too, and they’re less inclined to begrudge leaders their billions when they founded the company.  

But it’s worth considering what motivates leaders to build great companies that have a lasting impact and sustainable profitability. When I first interviewed Elon Musk almost 15 years ago, his goal was to enable human habitation on Mars and solve tough technical problems. Money was simply a means to getting things done. 

Maybe that’s still the case, and it doesn’t matter how much he’s paid as long as his investors get rich along the way. But populist leaders thrive in environments where people think the system is unfair, and employee engagement has long been tied to the same. People don’t work as hard when they feel their workplace is inequitable and too many of the rewards are being claimed by too few at the top. 

Curious to get your thoughts. More news below. 

Diane Brady
diane.brady@fortune.com
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TOP NEWS

Vaccine disinformation

For much of 2020, the U.S. military conducted a secret social media campaign to spread a disinformation campaign against China’s Sinovac COVID vaccine in foreign countries like the Philippines, despite concerns from the U.S. State Department and even social media executives. U.S. officials feared that China was successfully leveraging its provision of PPE and vaccines for geopolitical gain. Reuters

Australia-China thaw

China premier Li Qiang is in Australia for the first visit by a senior Chinese official in over seven years. Beijing recently lifted tough tariffs on Australian goods like wine, imposed after then-Prime Minister Scott Morrison called for an investigation into COVID’s origins. Total Australian exports to China hit $145 billion last year, the highest level ever. Bloomberg

Fake titanium

The U.S. Federal Aviation Administration is investigating how titanium with fake documentation made its way into Boeing and Airbus planes. The parts were made by U.S. firm Spirit AeroSystems, which supplies both Boeing and Airbus; the firm also made the door plug that ripped from a Boeing 737 fuselage earlier this year. Sources say the dubious metal comes from a Chinese supplier, where an employee forged details on the titanium’s source. New York Times

AROUND THE WATERCOOLER

Cathie Wood’s stunning new $2,600 Tesla prophecy and Wall Street’s Nvidia stock prediction share an often overlooked investing truth by Shawn Tully

Kickstarter shakes up leadership team, terminating senior employees and promoting execs, as it tries to rebrand itself by Jessica Mathews and Leo Schwartz

Bank of America says Broadcom could be the next trillion-dollar company—but rival Nvidia would still be 3 times larger by Niamh Rowe 

Portugal may have cracked down on golden visas after a housing crunch—but repeat visitors who stay at an Airbnb are still very welcome by Prarthana Prakash

Wells Fargo has fired a bunch of employees after finding out they were pretending to work by Eleanor Pringle

Impossibly high home prices are ‘feudalizing’ California as unaffordable housing markets pose existential threat to middle class, study says by Jason Ma

This edition of CEO Daily was curated by Nicholas Gordon.