Photograph by Nathaniel St. Clair
Could any corporate execs walking our world today be any greedier than the execs who run Big Pharma? Hard to say. But out-grasping Big Pharma, suggests a new report out of the U.S. Senate Committee on Health, Education, Labor, and Pensions, would certainly require some serious greed.
Consider, for instance, the pay record of the Big Pharma colossus Johnson & Johnson.
Two years ago, Johnson & Johnson pocketed $17.9 billion in profits and rewarded its CEO with $27.6 million in compensation. That same year, overall, saw Johnson & Johnson lay out $17.8 billion on stock buybacks, dividends, and executive pay — and only $14.6 billion on R&D.
“In other words,” the Senate panel’s report noted, “the company spent $3.2 billion more enriching executives and stockholders than finding new cures.”
Back in 2022, Bristol Myers Squibb also devoted $3.2 billion more to enriching already rich execs than to helping the hurting. Merck’s chief exec that same year collected an astounding $52.5 million in CEO compensation.
Last year, to keep the good times rolling, Big Pharma execs spent over $351 million on lobbying lawmakers, enough to keep almost 200 lobbyists gainfully employed on Capitol Hill.
But let’s not pick on Big Pharma. Our U.S. economy is overflowing with executive-suite greed, and the Financial Times has just zeroed in on one gang of particularly avaricious souls, the hustlers who run the private equity industry.
Private equity firms typically buy control of existing publicly traded companies, then take those companies private. To get the cash they need to make these initial purchases, private equity execs court deep-pocket investors. To guarantee these investors an attractive return, private equity kingpins squeeze workers at their newly acquired enterprises and shortchange their consumers.
The final step: Private equity firms take their “restructured” firms to Wall Street for “initial public offerings” that reap windfalls above and beyond the dividends they’ve been extracting all along from their privately managed takeover targets.
This classic high-finance wizardry, the Financial Times points out, has over recent years become much more difficult to sustain. “Sluggish demand for initial public offerings” has made offloading “existing investments” at huge profits next to impossible.
How have private equity kings, amid this messy scene, been able to keep their gravy train going? Simple. They’ve borrowed tons of new money. Last month, for instance, a giant contact lens retailer owned by the private equity giant KKR borrowed $565 million in new debt to pay off an existing loan and fund a $250-million payout to KKR.
Some additional context: In fiscal 2021, KKR’s two co-CEOs each pulled in over $523 million in total personal compensation.
How do execs like these rationalize their ongoing grasping? These execs can almost always, no matter how much they pocket, point to someone who’s doing even more grasping than they are. Someone like Elon Musk, the world’s richest individual over most of the past two years.
But Musk’s lucky streak of phenomenal good fortune has just hit a nasty speed bump: an unprecedented dressing down from a most unlikely source, the Delaware Court of Chancery, a state judicial body customized for corporate litigation.