Podcast: Billion-Dollar Bonus Beatdown: More Breaking News!
The Busyness Paradox Episode #35 – Billion-Dollar Bonus Beatdown: More Breaking News!
This just in: A guy asked for a billion-dollar bonus. Late-breaking reports (from last week) indicate that it went…poorly. As always, The Busyness Paradox is nowhere near the action, bringing you our on-the-spot analysis of this ballsy Bolivian billionaire’s brash beatdown (fine, “Bolivian-American” but we had a good thing going with that alliteration).
Mentioned in this “breaking news” episode:
Masayoshi Son – Founder, CEO and Chairman of SoftBank, CEO of Softbank Mobile
Marcelo Claure – CEO of SoftBank Group International, COO of SoftBank Group Corporation (please don’t ask us what all these different SoftBanks are all about)
Frank Butler 0:08
Breaking news Busybodies Marcelo Car…Clar…Claire? Clark?
Paul Harvey 0:14
I’m thinking Clar…Claure?
Frank Butler 0:17
It doesn’t matter
Paul Harvey 0:18
It doesn’t matter.
Frank Butler 0:20
The dude’s asking for a billion dollar bonus! Actually 2 billion! And then it turned into a billion somewhere in there, but either way, what?
Paul Harvey 0:29
Shot down for a two, apparently, or at least $1 billion bonus. That’s a rough day at the office.
Frank Butler 0:35
Paul Harvey 0:36
We did that episode recently…we’re about to do an episode…we will soon release an episode about asking for more money. Imagine asking for that much more money and getting shot down.
Frank Butler 0:46
I still can’t digest the billion dollar or $2 billion ask. Now granted, there’s a lot of information that says that this guy kind of helped build out bail out Softbank from a couple of bad investments they made, including we work and what was the other one I know he had some involvement with Sprint and getting sprint sold off because he was the CEO of Sprint for a little bit before being brought back in and being CEO of the SoftBank Group and then CEO of SoftBank International. Now, here’s the thing is that…I study M&A a little bit. I’ve never heard anybody getting paid a billion dollars, because their company got acquired. And it’s not even his company, right? It’s like he was the CEO of a company. Like that would be an incredible buyout, right, some sort of golden parachute, to get a billion dollars like unheard of, kind of golden parachute. It’s put it in perspective, I think the highest I ever heard was Nardelli, when he got fired at Home Depot, and he got paid $280 million, or something along those lines, that was like the highest golden parachute. It would be different if it was his company that he actually owned the company and founded it and built it up, which he actually did do that at some point because he sold his original company to Softbank a few years prior for like $1.6 billion. So…what!?
Paul Harvey 2:02
He’s a guy who likes billion dollar deals, Frank? Nothing wrong with that. He’s a mover and shaker.
Frank Butler 2:07
Mover and shaker. I mean, after your first billion right, you know, next billions real easy.
Paul Harvey 2:13
What have you done for me lately? Yeah. It does kind of bring to mind an interesting question regarding compensation in general, and executive compensation, we often think about it in terms of raw figures via dollars, or Yen’s, or whatever currency we’re working with. But if we think about it, in terms of what percentage of the money that I bring into a company, am I being paid? It sort of changes the calculus a little bit. Now, it doesn’t work as a model for compensation for most jobs, or at least for a lot of jobs, because many jobs, you don’t produce any profit, any revenue whatsoever. In fact, you’re a cost center, you cost company money, but you’re still there for obviously, for a reason. So it wouldn’t work that way. But according to this one analysis pushed out by the Associated Press. What he was asking for assuming the $1 billion ask would have been 2.7% Was it of soft banks? 2021. profit of $46 billion. I think it’s a lot of money. It’s not quite Apple money, but it’s it’s a lot of money. When you think of it that way. We don’t know how much responsibility Anyone person could possibly have for the revenue that he’s claiming responsibility for, but 2.7% of a company’s overall profit. That on the surface sounds more reasonable than a billion dollars. But even then, we this analysis that we this breaking news bulletin that we’ve just seen, shows a comparison with other successful executives like Tim Cook from Apple D. who just had the most profitable quarter in the history of anything. Earning .07% was it? No, no… .013%? Yeah. So
Frank Butler 4:03
Here we go…
Paul Harvey 4:04
Bonus money of .0013 of Apple’s profitability…I think.
Frank Butler 4:08
Here’s what they have here. “Last year, Apple’s board lavished CEO Tim Cook with roughly 95 million in bonuses.” And that’s because the company turned a profit of $94.7 billion. So he got point 1% of earnings last year for his bonus.
Paul Harvey 4:26
That’s almost conveniently almost exactly double, I guess, SoftBanks 46 billion there. So we do kind of have a an interesting point of comparison. He was given 95 million said, which equates roughly to that .0013% and this guy over in Japan, he’s not Japanese, but the company’s in Japan, asking for 2.7% Are you really worth…what is that, like 200 times what Tim Cook is worth?
Frank Butler 4:54
You know, and it goes back to me that he didn’t found the company. It’s not something he’d built up he didn’t do anything particularly except getting packaged. For example, with Sprint being sold to T Mobile, he just got the company prepared to sell. I’ve never heard of an executive making a billion dollars for coming in and turning a company into something that can be prepared to be sold.
Paul Harvey 5:18
Well you haven’t heard of it because it hasn’t happened.
Frank Butler 5:19
Paul Harvey 5:20
Frank Butler 5:20
The second element is that they’re also crediting him with having turned the WeWork fiasco into something, but when you look at it, they actually had to what was it nine $8.2 billion, they had a write off on that entire thing. Softbank Vision Fund posts a $17.7 billion loss on WeWork and Uber. I mean, granted, he did manage to put WeWork into SPAC and get it to go IPO that way, or basically get traded on the market. But that’s a big number. So they might have had to write off $8.2 billion, or 17 point 7 billion. There’s I’m seeing a lot of different numbers of write offs here. So is 8.9 billion in 2019 17. Point 7 billion in 2020. Again, he might have come in and salvage something from that, but a billion dollars.
Paul Harvey 6:11
Here’s what I think. I think, on some level, he kind of thought that he had either an implicit deal, apparently there was some scribbled on a piece of paper agreement between men Masayoshi Son, the CEO of SoftBank. Masayoshi Son famously showered WeWork with huge sums of money, as those write offs Frank just mentioned would indicate. And I think Marcelo here took what was a gigantic loss and made it a little bit less of a loss. Well, I shouldn’t say a little bit, much less of a loss than it would have been otherwise. So I kind of feel like maybe behind the scenes, he said, “Dude, I just helped you, like save some face here. Throw a billion my way, call it even.” I think something like that might’ve happened. And it wasn’t intended to become this big publicized, you know, thing. I think it was sort of a backdoor deal, or at least he thought it was a backdoor deal. And at least he thought it was a deal. Neither of those things, neither backdoor nor a deal.
Frank Butler 7:17
Yeah, I, I still can’t fathom it. You know, they they weren’t example that one article uses that Elon Musk got 6.6 billion last year, two years ago. And that’s a hard comparison to make because Elon Musk owns a significant chunk of Tesla, for starters.
Paul Harvey 7:34
I think they put that comparison in the article strictly for search engine optimization purposes.
Frank Butler 7:39
It has to be, right?
Paul Harvey 7:40
Let’s name drop Elon Musk. I think that’s it.
Frank Butler 7:43
Yeah. I mean, it just it really does not make a lot of sense. I mean, granted, I’m sure he’s worth having $100 million $200 million bonus paid out over a couple of years, maybe stock options, which is what a lot of people get
Paul Harvey 7:56
See now, anchoring effect!
One to two-hundred million dollars now seems reasonable. When you’re comparing it to a billion.
Frank Butler 8:02
No, but I mean, if you look at it, like like Tim Cook got a $750 million stock option back in 2011. That’s not vested or I thought it was vested after 10 years, I, I could be wrong.
Paul Harvey 8:14
But that’s a stock option, that’s not cold hard cash.
Frank Butler 8:16
Right. It’s not cash, right. That’s a difference. And I think that’s what you’re going with is that the stock option is different. It’s now you have to take it in the year to award it right. So like, they had to pay a lot of money on that tax, or like…
Paul Harvey 8:31
How do you even price that? Like, 750 million in at its current valuation or at its 2011 valuation?
Frank Butler 8:37
I think it was at its 2011 is when he was taxed, because he had to pay a big tax on that. But nonetheless, it’s like, that’s, that was one of the biggest awards ever to a non-owner type situation. You know, he’s not, he’s not found founder, right. I mean, he owned some stock, but not like, you know, sort of everybody right. And I think that’s one of those things to look at. Whereas, you know, Elon Musk, while he didn’t found Tesla, he did buy into him relatively early and turn them into who they are. It’s a pretty big deal, because when he took over Tesla, they were using load as bodies and putting batteries in electric motors and and turning those into it. And it was kind of cool, but you know, his niche he, and he had the idea of we need to really ramp that up. But again, you look at these folks like Jamie diamonds, another example, Jamie diamond, he gets ridiculously high pay. He’s one of the highest compensated CEOs out there. Again, non founder, non owner, founder and CEO, he just got a massive pay, but he’s still less than he’s actually less than Tim Cook when you really compare it to the profits. Don’t get me wrong. I’m sure the guy deserves a good healthy bonus. But there are times that you have to kind of pump the brakes a little bit. And I think one of these articles touched into something that was quite interesting, right? The idea that because Softbank is a Japanese company, and tremendous payoff. So this is what the article saying tremendous past executives are not looked kindly upon. So making these huge payments, that also has implications, right? You have to think of the cultural elements of this too. If he were to pay out a huge number like that, how would the stock market react in Japan? How for the Softbank stock? Or how would the other executives react? How would how would the country react? And what, what would the repercussions be for that?
Paul Harvey 10:28
And that’s the biggest question I I keep coming back to when it comes to the debate about executive salaries and bonuses is what’s the point? We’re talking sums of money that you couldn’t try to spend in your entire lifetime? Why get yourself into such hot water over? Over this? You don’t need the money? Can’t use the money? Wouldn’t you rather have people like like you and not have the world see you as like a greedy troll like, well, he’s
Frank Butler 10:56
probably a grandiose narcissist or something along those lines. Yeah. But
Paul Harvey 10:59
grandiose narcissist, want people to respect them.
Frank Butler 11:03
That’s true. But they also want people to they also want to be in the news, right? So there might be an element of, he’s getting a lot of attention,
Paul Harvey 11:08
status and money or status. Like it’s, you know, if we can get him on the show.
Frank Butler 11:13
And there we go. I keep thinking though. $2 billion, $1 billion. You’re right, it’s you’re never going to spend that money in a lifetime. And not only that, he’s also got a non compete, apparently, in his contract. So he couldn’t even like poach employees or anything for a few years. But the other element is that they saw one of the articles is that he’s going to get a really healthy payout, by leaving and in the magnitude of a couple 100 million or something like that. So it’s not like he’s leaving poor.
Paul Harvey 11:45
Now, I don’t think he went in for and I don’t think he’s leaving any worse off than he went in.
Frank Butler 11:50
I think he’s upset. Yeah, I think he’s significantly better off. Yeah, yeah. Here. Here’s another example. Right? So going back to we work, Adam Newman, who found that company, they pushed him out because, you know, we work with, I mean, that whole fiasco was just insane. There was a whole quote unquote, well, they quote unquote, a tech company or like, you’re, you’re leasing office space, and temporary type things. There’s no tech there. There’s nothing that you can really do in the way they were doing it that was creating that tech company style valuations, right? It just, it was ludicrous. And there’s creepy
Paul Harvey 12:22
as hell. Oh, anyone hasn’t jumped down that rabbit hole yet. I recommend it.
Frank Butler 12:26
Well, you can also listen to our cults episode where we kind of Yes, bring that up. It’s true. We did. We did so But Adam Newman, they basically paid him $2 billion to get out. However, Adam Newman actually owned the frickin company.
Paul Harvey 12:41
Right. You know, then there’s something
Frank Butler 12:45
you got to compare apples apples, right? I don’t know. I it just boggles my mind a little bit. The I mean, you know, there’s a way to do this reasonably, if he feels like he, he should have listened to our episode on how you should get a pay raise. Right. And I don’t know, the reason why we’re doing BREAKING NEWS on this is that this is truly one of those moments of this is next level, this is something that yeah, you kind of get the chaos with Elon Musk getting a $6.6 billion payout. Or, you know, Larry Ellison, at some point was getting paid out ridiculous money, or Steve Jobs was getting, you know, big money when Disney bought Pixar. And that made him the largest individual shareholder in, in Disney and it was what $7 billion, or something like that? I don’t, I don’t remember the number. But, you know, again, it’s because the guys actually owned and made these things and turned them into what they are, and then got their fruits of their labors from that. I don’t think I’ve ever heard of an executive being paid that kind of money that they didn’t have significant ownership stake or found the company at any point. I mean, this these numbers are just, I mean, Tim Cook got $750 million in options, but that was rolled out over a longevity bonus. It’s like you have to stay here and you have to because it’s an option. He has a strike price he has to hit it has to hit a certain valuation, which I would say given that when he received I don’t know what the apple valuation was in 2011.
Paul Harvey 14:09
It’ll hit the strike price [laughs]. He’s well into the money at this point.
Frank Butler 14:12
Yeah, I was gonna say because what was their valuation? Okay, so their market cap in 2011 Hit 337 billion. So about 10 times today, right? They’ve almost hit 3 trillion or they take three Charlie did briefly, huh? Okay. 750 million when you create $202.7 trillion evaluation? That’s a drop in the bucket.
Paul Harvey 14:39
Not even a rounding error.
Frank Butler 14:40
I, I can’t…I just, I can’t
Paul Harvey 14:43
I can’t either. In fact, I’m going to take this opportunity to announce my departure from the Busyness Paradox. Frank and I have agreed to a $700 million buyout. See you guys later.
Frank Butler 14:53
Wohoo! I’m retiring. Take care everybody.
Paul Harvey 14:55
No, you’re buying me out.
Frank Butler 14:56
Oh, dang, I don’t, uh…I’ll have to pay you out over 700 million years.
Paul Harvey 15:03
70 lifetimes [laughter]
Frank Butler 15:05
A dollar a year. Oh goodness.
Paul Harvey 15:15
Good day, folks.
Frank Butler 15:16
Paul Harvey 15:18
The Busyness Paradox is distributed by Paul Harvey and Frank Butler. Our theme music is adapted from “It’s Business Time” by Jemaine Clements and Bret McKenzie. Our production manager is Justin Wuntaek. We hope you’ve enjoyed this episode, and we’d love to hear from you. Please send any questions, comments or ideas for future episode topics to email@example.com, or find us on Twitter. Also, be sure to visit our website, busynessparadox.com, to read our blog posts and for links to the articles and other resources mentioned in today’s show. Finally, please take a moment to rate and follow or subscribe to our show on Apple podcasts, Spotify, iHeartRadio, Google Podcasts or…I don’t know, wherever the heck you get your podcasts.
Transcribed by https://otter.ai