I selected the company Intuit Inc. And indeed, there is a very marked
difference between the average compensation of the professional
employees Vs the compensation of the CEO of the company.
According to aflcio.org/paywatch (2022) Mr. Sasan Goodarzi, CEO of
Intuit received compensation for the year 2021 of $24,929,237
which was distributed as follows:
According to Bezinga.com (2022), As of September 2, 2022, Mr.
Goodarzi owns about 60,205 Intuit common stocks, after his last
stock sale on August 29, 2022, for an equivalent of $10.31 million
dollars. In the last 15 years, Mr. Goodarzi has received an average of
$223.66 million dollars in exchange for the sale of his shares.
Contrasting Mr. Goodarzi's annual compensation ($24.9M) vs. the
average compensation of a professional Intuit employee ($131.4K)
the CEO receives 190 times the average salary of an Intuit
professional, or as simple as that the average compensation of an
Intuit professional employee represents 0.52% of the CEO's
compensation.
Talking a little at the story of Mr. Goodarzi, according to an interview
conducted by Forbes (2022), is admirable that how a 9-year-old boy
from Iran, who was bullied, who had very low grades (1.9 GPA) that
caused him to be kicked out of school, took the advantages of the
opportunities that the USA offered him and his family (who left
everything in their country fleeing the revolution in Iran), to become
years later an executive of the company and CEO of Intuit. He told
Forbes as well in his interview that the success of his management is
in "True north goals", that is, maintaining goals for employees, clients,
communities, and shareholders, that is how, according to him, it how
he runs Intuit, and how its performance is measured outside and
inside the company.
However, we still see the gap between CEO compensation and the
average Intuit professional employee, but if we look at factors like
three years ago in 2019 (at the time he became Intuit's CEO), the
company was just a company focused on Accounting and Taxes, but
today he has driven record results for the company as he transforms
Intuit into an AI-driven expert platform through the recent additions
of MailChimp and Credit Karma to the product line-up that includes
Mint, TurboTax and QuickBooks (bolsazone.com, 2022). The change
and increase in business is also easy measurable, the increase in
revenue for the year 2018 vs. the year 2019 was 12.60%, from the
year 2019 vs. the year 2020 the increase was 13.19%, and from the
year 2020 Vs. the year 2021 the increase in revenue was 25.45%.
Lastly, if we measure the increase in Intuit's revenue since Mr.
Goodarzi is serving as CEO (2018 Vs 2021), the company has had an
increase of 59.88% (bolsazone.com, 2022), see the graphic below:
In my opinion I consider the compensation of the CEO ($24.9M)
excessive compared to the compensation of the average professional
employee ($131.K), that is, 190 times higher. Of the $24.9 million
dollars of his compensation, 87.17% ($21.7M) was paid with stocks
and options to purchase stocks, the rest being made up of 4% base
salary and 8.8% other incentives. These stocks represent much more
money than what is mentioned in his compensation, because at the
end of the day when he sells the shares, it generates an additional
profit to his compensation. For example, in November 2021 he sold
35,990 stocks at $685.96 each, and the stock price as of October
2021 was $543.97 (benzinga.com 2022). The success of a company is
not only achieved with good management by the CEO or the
executive leader team, but also teamwork, and although Intuit's
change is a reality since Mr. Goodarzi became CEO, the success of a
company is achieved with the work of all.
As a procedure for the audit of the compensation of the executives of
a public company or not, the first thing we must request is any
contract or document that exists between the company and the
employee (in this case the ELT), because there we should find each
one of the agreed points of how and based on what, they will
generate their compensation, either in a fixed salary, bonuses, stocks
or the possibility of purchasing preferred shares, among others. We
can also evaluate a payroll register, which reflects all the payroll
processed (outside or inside the company), to identify the highest
compensations and investigate the criteria used to grant these
payments in front of the results of this performance. The discussion
of internal control focuses on payments to employees, including a
description of how such transactions are processed and the key
control activities that should be present to ensure that no material
misstatements occur (McGraw Hill Education, 2019). I know many
compensations attract the attention of any person, financial
institutions, government, or an external auditor but we must proceed
to evaluate the criteria used by the who make the decisions to hire
these people and give them the remuneration and benefits that they
do. Then there we will be able to carry out the necessary tests to see
if there really a cost - benefit for the companies who are paying to
these executives these high compensations.
References:
https://www.benzinga.com/sec/insider-trades/intu/sasan-goodarzi
https://bolsazone.com/news/analisis-intuit-incorporated-buena-
opcion-compra-largo-plazo-cumplir-expectativas-financieras/
https://investors.intuit.com/news/news-details/2021/Intuit-
Reports-Strong-Full-Year-Results-and-Sets-Fiscal-2022-Guidance/
