A 300% Surge Makes Pot CEO No. 2 in Pay Ranking After Elon Musk
Brendan Kennedy knew early on that his bet on marijuana would take years to pay off—if at all.
It’s “either career suicide or it’s the smartest decision we’ve ever made in our lives—and we won’t know for three to five years,” Kennedy told Bloomberg in 2012.
The windfall didn’t arrive for six years, but close enough. In July, Tilray Inc. became the first cannabis company to list its shares on a U.S. exchange and rode a wave of investor hype to end 2018 with a 315% gain. That made Kennedy, its 47-year-old CEO, the second-highest-paid executive in 2018 among companies traded on U.S. exchanges, according to the Bloomberg Pay Index. His $256 million compensation package trails only the $513.3 million Tesla Inc. awarded to Elon Musk.
Bob Iger of Walt Disney Co. placed third in the pay ranking. He’s followed by Apple Inc.’s Tim Cook and Nikesh Arora, the former SoftBank Group Corp. executive who took over as CEO of Palo Alto Networks Inc. last year.
Highest Paid CEOs and Executives in 2018
| Rank | Name | Company | Total | Breakdown |
|---|---|---|---|---|
| 1 | Elon MuskCEO |
Tesla Inc. |
513,278,929 |
$56.4K$513.2M |
| 2 | Brendan KennedyCEO/President |
Tilray Inc. |
256,006,946 |
$425.0K$425.0K$11.3M$243.9M |
| 3 | Bob IgerCEO/Chairman |
Walt Disney Co. |
146,616,652 |
$2.9M$18.0M$8.6M$7.7M$108.3M$1.1M |
| 4 | Tim CookCEO |
Apple Inc. |
141,657,076 |
$3.0M$12.0M$126.0M$682.2K |
| 5 | Nikesh AroraCEO/Chairman |
Palo Alto Networks Inc. |
130,730,811 |
$155.8K$206.5K$39.4M$72.0M$19.0M$152 |
| 6 | David ZaslavCEO/President |
Discovery Inc. |
122,085,568 |
$3.0M$9.0M$15.3M$30.1M$64.2M$551.9K |
| 7 | James HeppelmannCEO/President |
PTC Inc. |
71,494,560 |
$800.0K$961.0K$27.2M$42.5M$8.3K |
| 8 | Stephen SchwarzmanCEO/Chairman |
Blackstone Group LP |
69,147,028 |
$350.0K$67.4M$1.4M |
| 9 | Tony JamesExecutive Vice Chairman |
Blackstone Group LP |
66,243,569 |
$350.0K$28.8M$36.8M$323.1K |
| 10 | Stephen AngelCEO |
Linde PLC |
66,190,743 |
$1.4M$3.6M$6.0M$6.1M$48.9M$250.5K |
Kennedy, unlike the other four, hasn’t previously been among the world’s top-paid managers. With Tilray, he joins an exclusive club of entrepreneurs whose gambles yielded compensation packages of a magnitude rarely seen at blue-chip companies. Examples include Snap Inc.’s Evan Spiegel, who was crowned the king of pay for 2017 with a half-billion-dollar package, and GoPro Inc.’s Nick Woodman, who led the list in 2014 with $284.5 million.
Like Kennedy, Spiegel and Woodman received big packages tied to their companies successfully launching initial public offerings.
“IPO grants serve two purposes—alignment with shareholders and retention, because an executive disruption at that stage can be very problematic,” said Aalap Shah, managing director at Pearl Meyer, a consulting firm that specializes in executive compensation. “The thing for shareholders to question is diminishing returns. Is there a point where the IPO grant isn’t really worthwhile?”
The Bloomberg Pay Index tracks the 100 highest-paid executives at companies that submit compensation details to U.S. regulators. The figures on the index consist of salaries, bonuses and benefits doled out in the most recent year.
They also include the value of awarded stock options and restricted shares that may yield payoffs in the future. For comparison purposes, all such equity awards are valued at each company’s fiscal year-end, not as of the date they were granted. The index’s figures can therefore differ from those disclosed in filings—sometimes by a lot—depending on stock-price changes and dividends.
Recurring annual grants of shares or options are counted in the year they’re bestowed, not when they vest. Any one-time grant meant to compensate an executive for several years is allocated over the life of the award as explained in regulatory filings.
Tesla’s Musk, for example, receives no compensation aside from large grants of stock options tied to performance goals. The securities are meant to pay him for a decade. But in cases where the targets were met ahead of schedule and the options have vested, he’s received new grants.
In 2018, he got his latest mega-grant of options, listed in filings with a value of $2.28 billion. The Bloomberg index allocates 1/10th of the securities to each of the next 10 years. His $513.3 million figure for last year includes a tranche of the 2018 grant and part of a similar but smaller options award received in 2012.
Tesla disputes Bloomberg’s treatment of Musk’s options.
“This analysis wrongly assumes that Elon received 1/10th of the combined value of his 2012 and 2018 performance packages, when in reality not a single dollar was realized last year,” the company said in a statement. The 2018 options are tied to ambitious milestones, and none of them has vested so far. Musk has never accepted the minimum salary Tesla is required to pay him under California law.
Highest Paid Women CEOs and Executives in 2018
| Rank | Name | Company | Total | Breakdown |
|---|---|---|---|---|
34 |
Safra CatzCo-CEO |
Oracle Corp. |
40,466,970 |
$950.0K$3.6M$35.9M$19.8K |
47 |
Angela AhrendtsFormer Senior VP |
Apple Inc. |
33,972,569 |
$1.0M$4.0M$28.9M$46.9K |
56 |
Katherine AdamsSenior VP |
Apple Inc. |
31,052,633 |
$884.6K$4.0M$25.9M$306.3K |
66 |
Laura AlberCEO/President |
Williams-Sonoma Inc. |
29,334,040 |
$1.5M$3.8M$13.2M$10.9M$31.2K |
Like Musk, most executives on the index aren’t guaranteed to pocket all, or even most, of their packages. Stock awards, which make up the bulk of their pay, are often contingent on performance conditions, and payouts are reduced if those aren’t met. On the other hand, if the goals are exceeded, the windfall could be significantly bigger than initially estimated.
Tilray’s Kennedy has experienced firsthand how fickle share prices can quickly create and cripple fortunes. His net worth swelled to more than $2 billion as the company’s stock soared in September to an intraday record of $300, but it dwindled from there along with the stock, which ended the year at $70.54. That’s still more than quadruple the IPO price.
Kennedy’s 2018 compensation consisted of $425,000 in salary, an equal-size bonus, and restricted shares and stock options worth $5.82 million and $25.1 million, respectively, when they were granted. At year-end, the shares had swelled to $52.9 million and the options to $202.3 million. The value of his package has dropped about 25% so far this year as the stock has continued to tumble. It closed Thursday at $47.59.
Iger, 68, signed a new contract in late 2017 that promised a hefty raise and special awards of restricted shares with an estimated value of more than $100 million, most of which haven’t vested yet. Some of those are tied to years-long performance goals, including Disney’s stock return relative to the S&P 500. In March, the company curtailed some of the increases and firmed up the performance goals after investors said they were too lax.
That still wasn’t enough to assuage every critic. Abigail Disney, a granddaughter of one of the company’s co-founders who’s a shareholder but has never been involved in managing the firm, said in March that the disparity between Iger’s pay and the $46,127 given to the median Disney worker was completely out of whack.
“Jesus Christ himself isn’t worth 500 times his median workers’ pay,” she told CNBC. Weeks later, she said in a Washington Post op-ed that she’s not disputing the rights of Iger and others to receive bonuses. “They have led the company brilliantly. I am saying that the people who contribute to its success also deserve a share of the profits they have helped make happen,” she wrote.
“Mr. Iger has delivered exceptional value for the company, its shareholders and employees: Disney’s market capitalization has increased 433% to $244 billion during his tenure, and the stock is trading at record highs,” a Disney spokesman said in an email.
“Disney has made historic investments to expand the earnings potential and upward mobility of our workers, implementing a starting hourly wage of $15 at Disneyland that’s double the federal minimum wage, and committing up to $150 million for a groundbreaking education initiative that gives our hourly employees the opportunity to obtain a college or vocational degree completely free of charge,” he said.
As with Musk, most of the compensation for Cook came from a stock award granted years ago that the index allocates over a decade. He also got a $12 million bonus for 2018—his biggest ever. (He’s said he plans on giving most of his money to charity.)
Arora, who took over Palo Alto Networks in June, got shares that will be distributed over seven years. He also got stock options that fully vest if the share price quadruples. The CEO is no stranger to big compensation—SoftBank paid him about $300 million during his tenure.
A spokesman for software firm PTC Inc., where CEO James Heppelmann is seventh on the Bloomberg Pay Index, said the majority of his compensation comes from a performance grant tied to goals spanning several years. In late 2018, he forfeited one of the awards for failing to meet targets.
For Tilray’s Kennedy, the road back to the billionaires club may be a long one, given the recent decline in the shares. Still, he said he’s confident lawmakers in the U.S. and elsewhere will continue razing what he calls “the Berlin Wall of prohibition” of cannabis.
Last year, when asked if he had sold stock to lock in profits, he answered tersely.
“Zero,” he said in an interview with Bloomberg. “I haven’t sold a share.”
That’s changed. Filings show he has netted roughly $24 million from stock sales this year.