GARY: HOW MUCH IS TOO MUCH?
THE DEBATE OVER CEO PAY IN
AMERICA IS HEATING UP.
LOU DOBBS SOUNDING OFF AT THE
FOX BUSINESS TOWN HALL.
LOU: CEO PAY IN THIS COUNTRY IS
OUT OF LINE.
THE WORKER, THE EMPLOYEE IS
WATCHING MANAGEMENT SOAR IN
COMPENSATION, WHILE WORKERS HAVE
JUST A DISADVANTAGE PART IN THAT
RATIO.
IT SHOULD BE MUCH MUCH LESS THAN
500 TO 1.
HISTORICALLY THE NUMBER IS
ANYWHERE FROM 20 TO 25 TIMES AS
MUCH.
AND THAT HAS TO BE ADDRESSED.
IT SHOULD BE ADDRESSED BY THE
STAKE HOLDERS, INCLUDING THE
PEOPLE WHO OWN THE COMPANIES,
THAT IS, SHAREHOLDERS.
GARY: LET'S BRING IN FORMER
WAL-MART U.S. CEO BILL SIMON.
BILL, THANKS FOR BEING WITH US.
WHAT IS YOUR RESPONSE TO WHAT
LOU HAD TO SAY?
>> IN A WAY HE'S RIGHT.
I THINK IT IS MARKET FACTORS.
THOSE HAVE BEEN DRIVING BOTH
EXECUTIVE PAY AND WORKFORCE PAY.
OVER THE LAST SEVERAL YEARS,
EXECUTIVE PAY HAS INCREASED AND
WORKFORCE PAY HAS BEEN LAGGING
UNTIL REALLY UNTIL THE LAST TWO
YEARS, BUT NOW WITH FULL
EMPLOYMENT AND WAGE INCREASES,
WE'RE STARTING TO SEE THE
WORKERS CATCH UP SOME.
>> HEY, BILL, GREAT TO HAVE YOU
ON THE SHOW.
THIS IS NOTHING NEW AS FAR AS
WEALTH INEQUALITY AND CEO PAY.
A GREEK LEADER TRIED TO FIX THIS
BACK IN 300 B.C. IT'S BEEN GOING
ON SINCE THE BEGINNING OF
CIVILIZATION.
AND IT HAPPENS REGULARLY
THROUGHOUT SOCIETY.
NOW WE SEE BIGGER WEALTH
INEQUALITY BECAUSE WE HAVE A
GLOBAL MARKETPLACE.
THE ONE THING THAT HAS NEVER
FIXED THIS HAS BEEN GOVERNMENT
POLICY.
SO WHAT IS THE ANSWER TO THIS,
AS FAR AS CEO PAY AND THE ANGST
THAT IS FELT AMONG THE WORKERS?
>> WELL, I THINK, YOU KNOW, YOU
ASKED THE SAME QUESTION ABOUT
BRYCE HARPER, IS HE WORTH IT?
AND THE ANSWER IS HE'S WORTH IT
IF SOMEBODY IS WILLING TO PAY
THE AMOUNT OF MONEY THAT HE'S
ASKING OR THAT HE CAN GET.
IN CEO PAY, PARTICULARLY RIGHT
NOW, YOU KNOW, THERE'S A LOT OF
DEMAND FOR CAPABLE AND TALENTED
PEOPLE, AND BOARDS HAVE TO BE
VERY VERY CAREFUL WHEN THEY MAKE
THEIR DECISIONS, AND THEY HAVE
TO OFFER THE RIGHT AMOUNT
INCENTIVE TO THE RIGHT PERSON.
MANY MANY TIMES THAT WORKS OUT
AND IT'S WORTH IT AND THEY PAY
SOMEBODY A LOT OF MONEY AND THEY
DELIVER FOR THE COMPANY.
AND OTHER TIMES, THEY DON'T, AND
MAYBE THEY END UP TALKING TO YOU
IN A CHAIR LIKE THIS.
[LAUGHTER]
>> BILL, IT'S HEATHER.
I LOVE WAL-MART.
I JUST THINK WE'RE PAINTING A
NEGATIVE PICTURE ACROSS THE
BOARD ON THIS TOPIC.
FOR EXAMPLE, IN 2018, HALF OF
COMPENSATION AWARDED TO S&P 500
CEOs CONSISTED OF RESTRICTED
STOCKS INCLUDING STOCK OPTIONS,
TWO THIRDS OF CEO PAY WAS
ACTUALLY EQUITY, WHICH IS A GOOD
SIGN, I THINK WHEN YOU'RE TYING
PAY TO PERFORMANCE.
I DON'T THINK THAT'S SUCH A BAD
THING.
I UNDERSTAND THERE WERE PARTS OF
THE STORY WHERE THEIR STOCK WAS
DOWN AND THE CEO STILL HAD AN
INCREASE IN PAY.
BUT OVERALL, ACROSS THE BOARD, I
WAS TAUGHT IN MY MBA CLASS THAT
YOU LOOK OUT FOR SHAREHOLDERS
AND YOU TIE YOUR COMPENSATION TO
SHAREHOLDERS AND YOUR STAKE
HOLDERS AS WELL.
ISN'T THIS A GOOD SIGN?
>> NO, I THINK IT IS, AND YOU'RE
RIGHT, IF YOU REALLY LOOK AT THE
PAY, THE REPORTED PAY, THE PAY
THAT COMPANIES HAVE TO REPORT
FOR SECTION 16 OFFICERS IS THE
MAXIMUM AMOUNT THEY COULD MAKE,
IF EVERYTHING WORKS WELL, AND
MORE THAN TWO THIRDS IN MANY
CASES IN THE CEO'S CASES, IT'S
AS HIGH AS 90% SOMETIMES OF THE
PAY IS INCENTIVE BASED, EITHER
IN EQUITIES OR IN BONUS, AND
THEY ARE PERFORMANCE BASED
PLANS.
SO YOU REPORT WHAT'S MADE
AVAILABLE TO THEM.
IF THEY DON'T SUCCEED, THEY
DON'T GET THAT.
BUT VERY RARELY DO THEY COME
BACK AND SAY OH, NO, THIS CEO
DIDN'T GET PAID BECAUSE THEY
DIDN'T PERFORM.
THEY ONLY REPORT WHAT WAS
OFFERED OUT THERE.
SO I THINK THE WAY IT'S GOING,
YOU KNOW, COMPANIES AND BOARDS
PARTICULARLY HAVE TO BE VERY
CAREFUL AND CLOSELY SCRUTINIZE
THE CEO PAY, BUT THINK THAT'S
HAPPENING.
GARY: I WANT TO SWITCH GEARS
RIGHT NOW.
WAL-MART CFO SAYS THE COMPANY IS
MONITORING THE TARIFF SITUATION
WITH CHINA, BUT WARNS THAT THE
HIGHER TARIFFS ARE GOING TO LEAD
TO HIGHER PRICES FOR ALL OF
WAL-MART CUSTOMERS.
SO WHAT HAPPENS IN THE BOARDROOM
IN WAL-MART RIGHT NOW IN THE
PLANNING ROOM AND HOW TO
NAVIGATE THIS?
>> WELL, HE'S A GREAT CFO AND
ONE OF THE BEST IN THE COUNTRY,
THEY KNOW WHAT THEY ARE DOING.
THEY WILL TREAT THIS COMMODITY
COST INCREASE LIKE THEY WOULD A
COST INCREASE ANYWHERE ELSE IN
ANY OTHER CATEGORY.
THE FIRST THING THEY WILL DO IS
LOOK TO SEE IF THEY CAN MITIGATE
IT.
CAN THEY NEGOTIATE IT?
CAN THEY MOVE IT SOMEWHERE ELSE
AND NOT INCUR THE COST BECAUSE
WAL-MART AND MOST RETAILERS,
MOST COMPANIES WILL TRY TO DO
THAT FOR THEIR CUSTOMERS.
THAT WOULD BE THE FIRST STEP.
THE SECOND STEP WILL BE WHAT
DOES THE MARKET LOOK LIKE?
IS THERE A WAY -- IF I HAVE TO
TAKE THESE COSTS, IS THERE A WAY
I CAN PASS THEM THROUGH?
IF THERE IS, THEY WILL.
IF THERE ISN'T, THEY WILL ABSORB
IT.
I WOULD EXPECT THE TARIFF IMPACT
IS WOULD BE DEALT WITH IN THOSE
THREE WAYS, A CERTAIN PERCENTAGE
I BELIEVE IN THE LONG RUN MOST
OF IT WILL BE MITIGATED, MOVED
OR NEGOTIATED AWAY.
A PORTION OF IT WILL BE ABSORBED
BY THE COMPANY BECAUSE EITHER
THEY CAN OR HAVE TO AND THE REST
WILL BE PASSED THROUGH
>> A NUMBER OF ESTIMATES ARE
FLOATING OUT IN THE MARKETPLACE
SAYING OVER THE COURSE OF THE
YEAR THIS WILL COST AN AMERICAN
FAMILY OF FOUR A LITTLE BITLESS
THAN $800.
LET'S GO WITH THAT NUMBER FOR
NOW.
I LOOK AT GAS PRICES WHEN THEY
RISE AND IMPACT THE AMERICAN
CONSUMER.
CONSUMERS STILL GET IN THEIR
CARS AND STILL TAKE VACATIONS
AND STILL TRAVEL.
EVEN IF WAL-MART DOES HAVE TO
PASS THAT OFF TO THE CONSUMER,
THERE'S A CERTAIN, YOU KNOW,
PART OF US THAT WILL DEAL WITH
IT AND FIGURE OUT A WAY.
DO YOU AGREE?
>> I DO.
CONSUMERS ARE SMART.
THEY ARE VERY SMART, ESPECIALLY
WHEN IT COMES TO THEIR MONEY.
THEY WILL FIND, YOU KNOW, THE
LOWEST PRICE AND THE BEST
PRODUCT THEY CAN FOR THAT PRICE
AND MAKE DO.
SO, YOU KNOW, THE ANALYSIS
YOU'RE QUOTING WITH $800 WOULD
BE IF THEY BOUGHT EXACTLY THE
SAME THING AT EXACTLY THE SAME
PLACE AND DIDN'T MAKE ANY
CHOICES BASED ON THAT, BUT IF
THE PRICE GOES UP 10%, THEY ARE
GOING TO MAKE A CHOICE AND BUY
SOMETHING ELSE OR GO SOMEWHERE
ELSE.
THAT'S WHAT THEY DO.
THAT'S WHAT THEY DO WITH GAS.
THAT'S WHAT THEY DO WITH ANY
COMMODITY.
RETAILERS ARE SMART ENOUGH TO
KNOW THAT SO THEY WILL ADJUST
THEIR PRODUCT TO DETERMINE HOW
MUCH THE MARKET CAN BEAR.
>> THIS IS ADAM WITH FORTUNE
MAGAZINE IN SAN FRANCISCO.
MY INSTINCT TELLS ME YOU ARE
SORT OF UNDERPLAYING WITH THE
RAMIFICATIONS OF PRICE INCREASES
ON CONSUMERS ACROSS THE BOARD
COULD BE FROM WAL-MART.
THE QUESTION I WANT TO ASK YOU
IS ARE THERE STRATEGIC THINGS
THAT COMPANIES LIKE WAL-MART OR
REALLY WAL-MART CAN DO SUCH AS
LOOKING FOR OTHER PLACES TO
SOURCE THEIR PRODUCTS, OTHER
THAN CHINA?
DO YOU THINK THAT'S AN ACTIVE
CONVERSATION AND SORT OF PLAY
THAT OUT FOR US, IF YOU WOULD.
>> OH SHUSH
>> OH SURSH
>> OH SURE.
THAT'S WHAT I MEANT BY
MITIGATING.
THE VERY FIRST THING THEY WILL
BE DOING IS TRYING TO FIND OTHER
PLACES AND OTHER SOURCES.
THEY WILL TAKE THESE COSTS THAT
ARE PRESENTED TO THEM IN THE
FORM OF A TARIFF AND SAY WELL,
IF I BUY IT FROM CHINA, THAT'S
GOING TO BE IN THERE, BUT IF I
BUY IT FROM VIETNAM OR IF I CAN
MAKE IT IN THE U.S., I DON'T
HAVE TO DEAL WITH IT.
THAT'S THE FIRST STEP IN THIS.
IN THE LONG RUN, I THINK THEY
WILL BE ABLE TO FIND A WAY TO
OFFSET ALL THOSE COSTS, WHICH IS
WHY CHINA REALLY NEEDS THIS DEAL
BECAUSE THE LONGER THIS GOES,
THE LESS LIKELY THAT AMERICAN
CONSUMERS AND COMPANIES ARE
GOING TO KEEP PAYING THE TARIFF.
THEY ARE GOING TO FIND A WAY, OR
A PLACE THAT CAN MANUFACTURE THE
PRODUCT WITHOUT THE TARIFF.
AND THAT'S WHY I REALLY STILL
THINK A DEAL WILL GET DONE.
GARY: BILL, REAL QUICKLY, I KNOW
WAL-MART MADE SOME BIG NEWS THIS
WEEK WITH ITS PLAN TO EXPAND
ONE-DAY DELIVERY.
YOU THINK AMAZON MAY BE SHAKING
IN THEIR BOOTS A LITTLE BIT THIS
WEEK?
>> I DOUBT IT.
I MEAN, AMAZON'S A GREAT
COMPANY, AND THEY'RE MARCHING
AHEAD WITH THEIR OWN PLAN.
WAL-MART'S APPROACH IS MORE THIS
SORT OF CONVERGENCE OF PHYSICAL
AND DIGITAL AND THE USE OF THEIR
STORES TO DO -- ORDER ON-LINE
AND PICK UP IN STORE AND DELIVER
THE LAST MILE.
WAL-MART IS GOING IN A LITTLE
BIT DIFFERENT DIRECTION THAN
AMAZON IS.
EITHER WAY, YOU KNOW, FOR BOTH
COMPANIES THIS IS AN EXPENSIVE
PROPOSITION, BUT IT IS WHAT THE
CONSUMER WANTS SO THEY ARE
HEADED IN THAT DIRECTION.
NO, I DON'T THINK AMAZON IS TOO
WORRIED ABOUT WAL-MART.