← The Prof G Pod with Scott Galloway
The Prof G Pod with Scott Galloway
The Real Problem with CEO Pay, and Why Young Men Don’t Volunteer Anymore
00:23:24
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- [00:01]
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Scott Galloway
It feels good to Geico.
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- [01:47]
Scott Galloway
Welcome to Office Hours with Prof. G. This is the part of the show where we answer your questions about business, big tech, entrepreneurship and whatever else is on your mind. If you'd like to submit a question for next time, you can send a voice recording to officehoursoffertymedia.com Again, that's officehoursoropertymedia.com or post your question on the Scott Galloway subreddit and we just might feature it in an upcoming episode. Our first question comes from Reddit user nstigmat and asks okay, in 2025, copay spiked 20 times faster than worker pay. Do you still think there is nothing we can do or should do to regulate this emerging class of oligarchs? I'm not sure I ever said that, boss. Okay, so let's look at the data. According to an Oxfam study, S&P 500 copay rose 26% between 2024 and 2025, while the average hourly earnings for private sector workers rose just 1.3% in real terms, meaning CEO pay grew 21 times faster than workers wages. In the US alone, the report covered 1500 companies across 33 counties and found that the average co pocketed $8.5 million last year, up from 5.5 million in 2019. So some more data. CEOs of major US companies were paid 21 times as much as the typical worker in 1965. That ratio grew to 31.1 by 78:60 to 1 by 1989 and surged to 380 to 1 in 2000 at the height of the stock market bubble. In 2024 it was 281 to 1. CEOs are paid excessively even relative to other high earners. Between 1965 and 1978, the average CEO at a large firm was paid almost three times as much as the average top 0.1% earner. By 2023 the ratio had risen to 7.5x. I'll just give you some examples. The Starbucks CEO Brian Nicholl received $98 million in 2024. That's 6,600 times more than the medium Starbucks worker. That worker would have had to have started working in 4600 BC just to earn what the CEO made in one year. Tesla's proposed a pay package for Elon Musk worth up to $1 trillion over 10 years. I mean it just gets worse and worse. So what to do about it? I think capitalism is about not putting ceilings on earnings. And I believe in a market demand versus supply based labor pool with higher minimum wage. I don't think I was on the board of Urban Outfitters and the CEO there said, you know, when we came under fire for some of the retail workers at Urban Outfitter stores not making a lot of money, came under fire for paying them so little. And he said we believe in supply and demand around the labor force. Now having said that, he also agreed at the end of the year to share a decent chunk of the profits with the store employees. He's a. Anyways, the company's controlled by the Haney family and I found them to be very decent people. Anyways, I don't have a problem with CEOs making billions of dollars. I don't have a problem. I don't want the government to regulate ratios. What I think the government should do is the following. I don't have a problem with elon Musk making $1 trillion. I think he should pay 70% marginal tax rate on that trillion dollars. I think corporations should pay an alternative minimum tax of 40%. They're paying about 22%. I think the average is probably closer to 17 or 15% when they stitch in all their loopholes. So I have no problem with people making a ton of money. What I want is a more progressive tax policy. And what happens now is that because the majority of CEO compensation comes in the form of equity, equity is taxed at a lower rate than salary. That makes no fucking sense. I go back to what Reagan, Reagan used to. It was just income. It wasn't. The battle isn't rich versus poor so much as it's owners versus earners and everyone versus the super rich. If you're making a million dollars in salary as the head or the head of the M and a practice for a law firm and you're living in New Jersey, you're probably paying 50% tax rate. But if you get to a point
- [05:54]
Commercial Announcer 1
where
- [05:57]
Scott Galloway
you own or you're the general counsel of a a firm with public equity and you get a million dollars in stock, you pay a lot less in tax rate. That makes no fucking sense. So when did we decide money is more noble than sweat? And so I think we need to equalize and lower the rates for earners and increase the rates or the alternative minimum tax or the rates that owners pay because essentially their wealth compounds annually with no friction. If you're a stock and every year you increase by $100,000, that's your salary. We're going to take 20 or 30% of it every year. So it just doesn't. It never grows that big. But if you own $100,000 worth of stock, it can grow, tax deferred and keep compounding without ever getting clipped unless you sell it. So I'm all for enormous pay packages. I think anything to try and get in the way of that is just going to create all sorts of weird perverted behavior. What do we need to do? We need to ensure that at a minimum, employees are making 25 bucks an hour in certain urban counties in America, which would put, you know, chicken processing plants out of business. Fine. Then you could adjust it down for certain territories where you can manage a middle class household on 20 bucks an hour. Okay, fine. But for most of us, most places in the nation, 25 bucks an hour minimum wage. It would be 23 if it had just kept up with productivity and inflation since the 70s. In addition, have at it. Pay the CEO of Starbucks 87 million. He should be taxed 60, 70 bucks percent on that money. Why? What you want is a tax system that is the least taxing. And when you tax the CEO of Starbucks, who I'm sure is a lovely man, 70%, this is what happens. Nothing. I mean, you put more money into the government so we can reduce our deficit and invest in schools and the Navy and parks and what have you, but nothing happens to him or his family in terms of happiness. Daniel Kahneman, one of my intellectual role models, did a study, talked a lot about money above a certain amount. Money can buy happiness up until a certain point. And then once you can afford healthcare, nice vacations, housing, an economic shock, which is a lot of money, it levels out. Now, another myth. Billionaires are unhappy. No, billionaires are no less happy than millionaires, but they're no happier. So if you're going to get no incremental happiness from. If Elon Musk is going to get no incremental happiness from that trillion dollars, but hundreds of thousands of households would get a lot of incremental happiness from universal childcare, then my attitude is, let's go back to the 50s, 60s and 70s, where we had a much more progressive tax structure. In sum, I don't believe you can get in the way of market dynamics around CEOs making a shit ton of money. A good CEO adds a lot of value. Let me add some nuance. I've been on the compensation committee of a bunch of companies and this is how it got out of fucking control. Every year, Towers parent comes in to the board and we pay them a quarter of a million dollars to do a compensation study. And they say, okay, Janet Robinson, I was on the board of the New York Times, is the CEO of a $5 billion media company. This is what the average person at 50% makes of CEOs of $5 million. Media companies, they make $3 million. And we say, but wait, Janet's nice. We don't want to just pay her at 50%. We want to pay her at 60 or 70. So we pay Janet 3.8. But here's the problem. When you pay people 20% above the median, that doesn't sound like a lot. But then every other company, the median starts to explode and every company has to keep up with the Joneses. Meanwhile, the people who don't play golf or have relationships with the board just get slightly above inflation. But the CEO, who's a good guy or a good gal, who you get to know, who, by the way, puts you on the board and you're making a quarter of a million dollars a year on the board of the New York Times. You want to pay her above average. So if you pay 20% above average, which doesn't sound like a lot, that's just at the 60 percentile. That means every three and a half years you're doubling CEO compensation because everybody else has to adjust as well. So we have seen a skyrocketing and an explosion in compensation. This is about tax policy more than the government trying to interfere with compensation. I appreciate the question. Question number two comes from Andrea hi
- [10:14]
Listener/Caller Andrea
Scott, I'm a liberal Subaru driving, tote bag carrying rural Christian white woman, but as an economic realist I find myself agreeing with you about 75% of the time. Each week I volunteer to distribute breakfast bags the homeless outside my church and we frequently host student groups from schools to help us move heavy bulk items, make sandwiches, pack paper bags and hand them out to anyone who needs an tasks. And each week I find that my volunteers are always girls. Even when it's athletic teams, it's only girls teams. When I first started teaching, I knew that boys were always less involved in clubs and extracurriculars in general. But 10 or 15 down years down the road, good testosterone is even harder to find. I don't know whether to blame the manosphere, trump the parents, etcetera, etcetera. But rather than focusing on the problem, my question for you as an economist is about incentives. How do we incentivize our young men to engage more in community issues? How do we incentivize their parents to lead them on the way they should go? How do we incentivize schools, coaches, organization leaders, etc to start holding their young men to a higher level of citizenship because obviously someone has de incentivized them. Thanks again and trust me, I hear you when you say that building stronger men makes for safer women and children in the long run. Thanks Andrea.
- [11:54]
Scott Galloway
Hello Subaru drivers. So first off, I can't. It's as if no one everyone always says the same thing. While I don't always agree with Scott Galloway, I get the 75% a lot. It's hilarious. And most of my comments I would start with. People are embarrassed to just agree with me. They say while I don't always agree with Scott, or I agree with Scott 75% of the time. And I'm fascinated by the ratio because the 75 number comes up a lot. One I do get it wrong a lot. Constantly. I'm trying to be as unfiltered as possible and sometimes it results in hot takes that are, quite frankly, are just the wrong take. But what I would also say is I appreciate people tolerating me because I do think it's important to listen to people that if you listen to someone you always agree with, you're probably not going to learn a hell of a lot, or it's just going to cement your opinion and probably put you further in the center of your bubble. Anyways, I wish I had a more thoughtful answer. I had two emotions. The first is, one, you sound lovely and you sound like the kind of thing that. Or the person that really is the fabric of America. And my second emotion was God, it's just such a bummer, right? Such a bummer that I see this everywhere. Talk a lot about the importance of mentorship, especially male mentors in a young boy's life or a young man's life. There are three times as many women applying to be Big Sisters of New York as there are men. And I'm embarrassed to say it. I think I was one of those men. I think up until the age of 40, I just wasn't very philanthropic. I don't know if it's the feminization of nonprofits. It's seen as more feminine. I don't know if it's because women are more nurturing.
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Commercial Announcer 4
I don't know if it's instinctual.
- [13:33]
Scott Galloway
I don't know if it's. Women are brought up to be more service minded, more sensitive, to be pleasers. The honest answer is I don't know what can be done. I think that as a standard practice among organized sports and disorganized clubs, there has to be a service component in addition to femininity and masculinity are social constructs, and we get to fill those. We get to fill those vessels with whatever we want. And I've been thinking a lot about. I read a book on masculinity, and I was saying basically the three legs of the stool are provider, protector, procreator. I think where I missed it, and I missed a lot, is I'm trying to figure out an elegant way to incorporate an aspirational vision of masculinity that includes service. And I think a decent test for masculinity in your actions. And when I talk to young men, especially when they get social media followings, are you optimizing for service or for attention? I think unfortunately, a lot of our weaker role models are constantly optimizing for attention and not for actual service. And some people would say that decent definition of character is doing the right thing when no One's looking. But I wonder how we can incorporate, especially among young men through our schools, our religious institutions, that masculinity and the strong man has a strong foundation in service. And a lot of religious institutions do a great job of this. I remember my dad was married and divorced four times as far as we know. And I remember going to. I always remember we were a member of a Presbyterian church out in Westlake, California. And on a regular basis, the whole, would you call the whole parish, the whole community would go provide service at my son's school. They are forced to here in London, engage in some sort of volunteer service. I wonder if some of the male role models, if we can do a better job of encouraging them to highlight their service. And I do think actually a lot of athletes do a good job. But I don't have a silver bullet here and I find it just so disappointing to hear that. And when you say it, it just resonates. So let's try and summarize. I don't think this is about men being less generous. I'm holding out. That's not the case. I think it's about incentives, identity and social structure. Volunteering is to a certain extent how we've designed pathways for young women to be more nurturing, to be pleasers. And it doesn't map as clearly to how young men are wired or rewarded. They're expected to be providers. Ballers make a ton of money and I think volunteering is seen as low roi or more bluntly, if you want more young men volunteering, you have to make it look more like status, skill building or a team based activity, not just service, if you will. But it's an issue. It's one we should address at a very young age. And I want to finish where I started. I think that people such as yourself are the fabric of this country and very much appreciate you and your service. I hope you have boys and girls, just hope you have kids. We'll be right back after a quick break.
- [17:12]
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Scott Galloway
im8ed im8 love it. Hydrating, refreshing. Makes me feel like I'm healthy. I hope I am healthy, but this makes me really feel that way. So big fan of imate.
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- [20:53]
Scott Galloway
Question number three comes from I am the catalyst on Reddit early on As a business owner, hiring has always been one of my most important responsibilities. As we've grown, more of our recent hires are specialized roles where I have less direct involvement. What I'm navigating now is less about hiring and more about managing people whose motivations differ from the company's core direction. For example, I have an employee who has been passionate about pursuing B2B partnerships and frankly, it's been wildly successful. But at our core, we're a B2C business and that's the mission I want to protect. Scott, have you experienced something similar where an employee's drive and results are generally impressive, but their vision pulls in a different direction than where you want to take the company? How do you reward the employee's contributions without signaling to your long tenured mission in line team members that the company's direction is shifting? Hmm. This sounds very situational and I would argue that if this person is that successful, it probably means you may want to, I don't know, calibrate or I don't know, manicure. The positioning Every company I've started has ultimately ended up doing something different than I'd originally envisioned. My first firm was a market research firm and then we dropped market research and called it strategy. I had started coming out 911 gifts for last minute gift giving. Then we went more aspirational, was became red envelope. Initially L2 was benchmarking luxury brands and it just became about benchmarking. I mean, so I would be, I think like that's why you get paid the big bucks. You got to decide if it's bad for the culture and not helping. We have a really robust speaking business. We probably do 4 or 5 million bucks a year in profit markets. I used to be the only speaker, but now we have two or three people get paid speaking gigs. That's not the future of the firm. No one's going to buy. They're not going to buy us and we're not going to create a ton of shareholder value through speaking. But it's a great way to fund the company's strategic initiatives so we can hire more tech people, launch more podcasts, et cetera, pay people better. So I just think it's situational. If they're doing something totally different that's bad for the culture and taking off course and not making a lot of money, yeah, then shit can it. But if this person is really wildly successful, milk it and take the cash. Or maybe rethink the direction of the company. If that's a division that should. You've kind of stumbled onto something that's maybe better and bigger than your core business. But again, it's situational and I don't. It's not bothering anybody or I just don't. To me, this sounds like a good problem and it's a question of proportions. If this individual is garnering a ton of incremental high margin revenue, then ring fence them, let them have at it and also re evaluate if this means if you've stumbled onto what might be a nice adjunct for the company or maybe requires serious consideration around complementing or changing the direction of the company. In sum, I don't know without having more specifics and also the fact that you bring this up maybe thinks that gives me the impression that maybe you don't like this person's approach to work and that they just make so much money that you have to put up with them. I've had a lot of those. And that's what it means to be a manager is unfortunately usually the most talented people in the company, often, not always, but oftentimes are the biggest assholes because they know they have leverage. Anyways, I apologize, I don't have a real. And unless I knew more about the specifics, the size of the incremental revenue from that B2B business. But if it's not. If it's. Yeah, it's an easy one. If it's not offering a ton of marginal revenue and it's a distraction, then shit can it. But I think you have to. I think you have to meet with some people, lay out the numbers, lay out your concerns and have a kitchen cabinet. I don't know if you have a board to make a thoughtful decision around this. Thanks for the question. That's all for this episode. If you'd like to submit a question, please email a voice recording to office hourspropertymedia.com Again, that's office hours of prophetmedia.com or if you prefer to ask on Reddit, just post your question on the Scott Galloway subreddit and we just might feature it in an upcoming episode. This episode was produced by Jennifer Sanchez and Laura Gennar. Cami Reek is our Social Producer, Brad Williams is our Editor, and Drew Burrows is our Technical Director. Director thank you for listening to the Propsheep hub from propag Media.
- [25:27]
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- [26:51]
Listener/Caller Andrea
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