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Despite “BAD” Headlines, Boeing (BA) Still Wins Billion Dollar Contracts

Wednesday, June 12th, 2024

Despite “BAD” Headlines, Boeing (BA) Still Wins Billion Dollar Contracts

 

Key Points:

  • Boeing continues to make negative headlines but still gets orders and contracts, including a $7.48 billion contract from the United States Air Force.
  • Boeing has a long growth runway bolstered by a Q1 2024 backlog of over 5,600 airplanes valued at $448 billion.
  • Boeing's largest revenue generator is its Defense, Space and Security division, which recorded $6.95 billion in revenues, up 6% YoY compared to the Commercial Airline division, posting $4.65 billion in Q1 2024 revenues.

Aerospace giant The Boeing Co. (BA) has had a tumultuous year (2024), making negative headlines on a weekly basis regarding safety protocol violations and whistleblower allegations. From mid-air turbulence to parts falling out of the sky to the infamous Boeing 737 MAX 9 fuselage door that flew off mid-flight on an Alaska Air Group Inc. (ALK) flight as a result of no bolts on the door panel.

Boeing has been investigated by the National Transportation Safety Board (NTSB), the Federal Aviation Administration (FAA), and the United States Justice Department. This has resulted in Boeing stock trading down 31% year-to-date (YTD). However, amidst all the turmoil, the company continues to win BILLION DOLLAR contracts.

Boeing competes in the aerospace sector with Airbus SE OTCMKTS: EADSY and in the defense industry with Raytheon Technologies Co. (RTX) and Lockheed Martin Co. (LMT).

The Power of an American “DUOPOLY” for Boeing

It seems no matter how ugly the news gets on Boeing, the aircraft orders and contracts continue to come in. It pays to be an American “DUOPOLY” as its only true competitor for building commercial passenger aircraft is France's Airbus. In that sense, the company is Teflon.

Its entry into the space race to challenge Space X with its astronaut-occupied Starliner was delayed on June 1, 2024, minutes before the scheduled launch. This is the second launch delay, with the first on May 25 after discovering a helium leak. No reason was given for the June 1st delay, but it's been rescheduled for later in June (2024).

While Boeing has garnered most of the attention for its commercial airplanes, the company is also a major player in the defense industry. As a matter of national security, Boeing is not only “TOO BIG TO FAIL” and “IT’s ALSO TOO BIG TO JAIL”!!!

Boeing is Awarded a $7.48 Billion Air Force Contract

On May 27, 2024, Boeing's subsidiary Boeing Defense Space and Security out of St. Louis, Missouri, won a $7.48 billion fixed-price-incentive-fee, firm-fixed-price, indefinite-delivery/indefinite-quantity contract action for Joint Direct Attack Munition (JDAM). The contract calls for JDAM kit spares, repairs, and Laser Joint Direct Attack Munition (LJDAM) sensor kits. The work is expected to be completed by June 2030.

A Rising Channel Forms on Boeing Stock

BA illustrates a rising price channel pattern. This pattern is comprised of parallel trendlines representing higher highs and higher lows. It indicates that buyers have been patiently buying the dips at higher levels on pullbacks. The dips happen in a single large red candle, which is then built back up with a series of smaller candles, demonstrating the stock's resiliency. The daily relative strength index (RSI) is coiling back up again at the 50-band. Pullback support levels are at $171.61, $167.50, $159.70 and $152.80.  

Boeing reported a Q1 2024 non-GAAP core EPS loss of $1.13, which beat consensus estimates for a loss of $1.63 by 50 cents. Revenues fell 7.5% YoY to $16.57 billion, beating estimates of $16.24 billion. The company took steps to slow down 737 production in an effort to strengthen and improve quality.

Boeing's Quality Management Improvements and Supply Chain Optimization

The Commercial Airplanes segment revenues fell 31% YoY to $4.65 billion with a negative 24.6% segment operating margin. This reflects the production slowdown to under 38 deliveries per month to incorporate improvements to its quality management systems and reduce traveled work inside its factories and supply chain.

The segment booked 125 net orders, including 85 of the 737-10 airplanes for American Airlines Group Inc. AAL and 28 777x airplanes for customers, including Ethiopian Airlines. The segment delivered 83 airplanes in the quarter with a backlog of over 5,600 airplanes valued at $448 billion.

Boeing's Defense, Space and Security Segment is “RODUST”

Q1 2024 revenues for its Defense, Space and Security segment rose 6% YoY to $6.95 billion. Operating margin improved to 2.2%, driven by higher volume and improved performance. The segment won awards for 17 P-8A Poseidon aircraft for the Royal Canadian Air Force and German Navy. The segment secured the final new-build production contract from the United States Navy for 17 F/A-18 Super Hornets and won a contract for MQ-25 cost-type contract modifications from the Navy, including 2 additional test aircraft. The backlog in the segment was $61 billion, of which 31% were international orders.

Boeing President and CEO DAVE CALHOUN commented, "Our first quarter results reflect the immediate actions we've taken to slow down 737 production to drive improvements in quality. We will take the time necessary to strengthen our quality and safety management systems, and this work will position us for a stronger and more stable future."

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Avoid Getting a Late Start on Saving/Investing for Retirement

Tuesday, June 11th, 2024

Avoid Getting a Late Start on Saving/Investing for Retirement

Bottom of Form

Over the past week, I have heard essentially the same thing from two (2) different ATWWI FAMILY MEMBERS.

The first person responded to one of my “WIZ DAILY JOURNALS” about WEALTH-BUILDING, essentially saying that she was approaching retirement and hadn’t managed to save any money. She said this was totally beyond her control (she cited medical issues) and she said she “FEARS” for her future.

The other said:

“Confession time. I am almost 49 and have zero retirement savings. No exaggeration. Absolutely nothing. Maybe $900 in my checking account. No idea what I am going to do. And I know I can’t be the only one.”

These are challenging situations. Indeed, there are many people in this boat. There is a reason I stress to people to get started EARLY. If you get an EARLY start, the amount of savings required to reach a million dollars of savings is relatively modest. Wait until you are 49, and it can be a HUGH challenge!!!

First, let me address young people. If you are 20 years old, and you want to accumulate $1 million in savings by the time you are 65 years old, you would need to save and INVEST only $24 a week (assuming the average long-term return of the S&P 500 and tax-free accumulation).

Wait until you are 30, though, and you need to save nearly three (3) times as much per week. So, getting an EARLY start is important.

If you wait until you are 49 years old, you are going to have to save $486 a week to reach the $1 million savings mark at 65. That’s going to be out of reach for many. It’s going to be especially challenging if you have not developed good savings habits. But there are alternatives…

STRATEGIES FOR LATE STARTERS

The first thing someone in this boat needs to realize is that “MAJOR” changes may be required if you are sincere about accumulating some retirement savings. Not everyone is in the same boat but let me offer some “GENERAL” guidelines that provide at least one or two strategies that everyone can use.

I write this as someone who watched my “ELDERS” all retire on nothing but Social Security/INSECURITY payments. You don’t want that… It’s a tough life!!!

You also shouldn’t expect the government to come to your “RESCUE”, because they WILL NOT!!! I won’t say it will be easy, but you have to take matters into your own hands.

I know there are still people who will say they can’t do any of these things. That’s sadly true in some circumstances, but I doubt it’s true for the majority. Dig deep and make the tough choices as soon as you can. If you don’t, the harsh reality is that time is going to impose those choices on you. Take some CONTROL of your DESTINY while you can.

ASSESS CURRENT FINANCIAL SITUATION

The first thing you have to do is evaluate your CURRENT financial situation. I think this is the step where most people “FAIL”. Your budget comes down to the money that flows INTO your accounts and the money that flows OUT.

If you are unable to save money, then you could have a problem on the income side, the spending side, or both. Therefore, you have to track income and expenses to OVERSTAND/UNDERSTAND where money is going and identify areas where spending can be REDUCED.

I recognize that things are “EXPENSIVE”. Education, housing, transportation, food — those are “EXPENSIVE” items. BUT, if you are in a “DIRE” financial situation, you need to do “TRIAGE”.

There are certain items in your budget that will be non-negotiable (to an extent). Food, for example, is in that category. However, there can be an awful lot of flexibility in how much you spend on food, while still getting nutritious meals.

You need to take a hard look at your DEBT. Focus on paying off high-interest debts FIRST, as this can free up money for savings. It’s pointless to start investing money with a long-term “HOPE” of earning 10% annually if you have a credit card balance with a 20% interest rate. Make it a “PRIORITY” to pay off any debts with interest rates above 8%.

If you don’t have a good OVERSTANDING/UNDERSTANDING of your financial situation, it may be hard to stick to a long-term savings plan.

PLUGGING THE GAPS

A thorough OVERSTANDING/UNDERSTANDING of your financial situation may rapidly identify areas for quick improvement. If you eat out four (4) times a week, then you can quickly improve the expense side by simply cutting back.

However, if you have assessed your budget and still feel it is tight, you may to have to take more “DRAMATIC” steps. You may need to consider a more “SIGNIFICANT” lifestyle change by downsizing on two (2) of the most significant expenses in most people’s budgets.

If a mortgage payment is eating up too much of your budget, consider downsizing to a smaller, more affordable home to reduce housing costs and potentially free up equity. If you still have a car payment — but you could get by with less car — opt for a reliable, economical vehicle to reduce transportation expenses.

You should also consider ADDITIONAL income sources. Remember, this is a “TRIAGE” situation. You want to make these sacrifices now, so they aren’t imposed upon you when you reach retirement. The goal here is for you to have “CHOICES”.

You don’t want to be forced into a “CHOICE” of living in poverty in retirement versus working until the day you TRANSITION (aka: die)!!!

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

The Stock Market Is “ROARING” Past “RECORD HIGHS”: The Two (2) Worst Mistakes ATWWI FAMILY MEMBERS Can Make Right Now

Monday, June 10th, 2024

The Stock Market Is “ROARING” Past “RECORD HIGHS”: The Two (2) Worst Mistakes ATWWI FAMILY MEMBERS Can Make Right Now

With the S&P 500 bouncing between record highs, YOU, ME, WE the ATWWI FAMILY should be mindful of these “COSTLY” mistakes.

The S&P 500 has surged through 24 record highs in 2024 after going more than 500 trading days without a single one.

Factors contributing to those gains include anticipated INTEREST RATE CUTS and excitement about ARTIFICIAL INTELLIGENCE (AI), both of which promise to stimulate economic growth.

Indeed, Nvidia (NVDA) has become the quintessential AI stock, and it is responsible for about one-third of the gains in the S&P 500 year to date.

YOU, ME, WE the ATWWI FAMILY have been monetizing NVDA almost weekly.

Much like the chipmaker’s string of stellar financial reports, ATWWI FAMILY MEMBERS are apt to wonder how much longer the S&P 500 can maintain its momentum without a correction.

Here are the two (2) worst mistakes YOU, ME, WE the ATWWI FAMILY can make right now.

Mistake 1: Avoiding stocks in anticipation of a market correction

“ANXIETY” is a natural reaction when the S&P 500 is bouncing between “RECORD HIGHS”, BUT avoiding the stock market for “FEAR” of a correction is a POOR strategy. The S&P 500 has HIStorically performed very well after notching a new high…

Since 1950, in the year following an all-time high, average total returns for the S&P 500 index were 12.7%, compared to 12.4% for other 12-month periods. If you look back at each time the S&P 500 reached an all-time high, you can see that the market often pushed even higher, reaching new all-time highs thereafter.

Over the last 50-odd years (going back to 1970), if you invested in the S&P 500 at an all-time high, your investment would have been higher a year later 70% of the time, with an average return of 9.4% — versus the 9% on average when investing at any time.

Here’s the bottom line: While it may seem “PRUDENT” to avoid the stock market at “RECORD HIGHS”, investors that attempt to “TIME” the market often get burned.

Wall Street legend PETER LYNCH said it best:

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

 

Mistake 2: Ignoring valuations when buying stocks

Getting swept away by stock market momentum can be just as dangerous as avoiding the stock market altogether. Rather than “ANXIETY”, some investors become “OVERCONFIDENT” when the S&P 500 is bouncing between “HIGHS”. They feel as though they can do no wrong because their portfolios keep getting LARGER. BUT, ignoring VALUATIONS to chase headlines is a recipe for “DISASTER”.

The sobering truth is the S&P 500 currently trades at 20.3 times forward earnings, a premium to the five-year average of 19.2 times forward earnings and the 10-year average of 17.8 times forward earnings.

That means some stocks (or perhaps many stocks) are expensive by HIStorical standards.

YOU, ME, WE the ATWWI FAMILY should be particularly cognizant of that fact when making decisions.

No stock, no matter how good the underlying business, is worth buying at any price. 

WARREN BUFFETT shared a similar opinion in his 1982 letter to Berkshire Hathaway shareholders. “A too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”

There are many ways to “VALUE” a stock. Some investors like RATIOS, while other prefer more complex approaches like DISCOUNTED CASH FLOW model.

Either way, the goal is to determine whether a particular stock is trading ABOVE or BELOW its INTRINSIC VALUE.

YOU, ME, WE, the ATWWI FAMILY would be well advised to avoid stocks trading at significant premiums to their average PRICE-TO-SALES RATIOS or PRICE-TO-EARNINGS RATIOS over the last two (2) or three (3) years, unless the business has undergone some “SIGNIFICANT” change.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

The U.S. Economy Is “SLOWING” But Not “IMPLODING”

Wednesday, June 5th, 2024

The U.S. Economy Is “SLOWING” But Not “IMPLODING”

Bottom of Form

The U.S. economy is taking its foot off the gas. While the economic expansion continues to chug along, there are discernible signs of a “SLOWDOWN” following a period of robust growth in 2023.

Paradoxically, that’s a “GOOD” thing. The slowdown eases inflation worries, which in turn brings DOWN BOND YIELDS and gives the FED confidence to CUT interest rates.

The latest ISM Manufacturing index, released this week for the month of May (2024), revealed a DECREASE in FACTORY PRODUCTION, driven by a stark DECLINE in NEW ORDERS. This unsettling revelation has diminished the “RISK ON” appetite of equity investors.

Economic activity in the MANUFACTURING SECTOR DECREASED in May (2024) for the second consecutive month and the 18th time in the last 19 months, per the latest Manufacturing ISM Report on Business.

The Manufacturing PMI registered 48.7% in May (2024), down 0.5 percentage point from the 49.2% recorded in April (2024). The overall economy continued in EXPANSION for the 49th month after one month of contraction in April 2020.

The economy is “SLOWING”, but not “IMPLODING”…

A Manufacturing PMI above 42.5%, over a period of time, signals economic EXPANSION. Economic growth and solid corporate earnings should keep stocks aloft.

HOWEVER, most Americans continue to live in an UPSIDE DOWN “ALICE IN WONDERLAND” world!!!

According to a recent Harris poll, 55% of Americans believe the economy is SHRINKING, and 56% think the U.S. is experiencing a RECESSION, despite a slew of data that shows the economy has been GROWING.

The poll also found that 49% believe the S&P 500 stock market index is DOWN for the year (2024), though the index went UP about 24% in 2023 and is UP more than 12% this year (2024).

As ALICE says in LEWIS CARROLL’s book: “If I had a world of my own, everything would be nonsense. Nothing would be what it is because everything would be what it isn’t. And contrary-wise; what it is it wouldn’t be, and what it wouldn’t be, it would.”

That sounds like an accurate description of today’s politics (aka: ”POLITRICKS”) in America. As an investor, YOU ,ME, WE the ATWWI FAMILY need to always be sure to deal with “REALITY”…AND, the “REALITY” is this: the economy is GROWING (albeit at a DECELERATING pace), INFLATION is FALLING, and the STOCK MARKET is THRIVING.

So far in 2024, EQUITIES have maintained their dominance over BONDS and CASH, with U.S. LARGE CAP STOCKS boasting an impressive 11% INCREASE year-to-date. GROWTH oriented investments, particularly in the TECHNOLOGY and COMMUNICATION SERVICES sectors, have spearheaded this ascent.

Amid the incessant buzz surrounding TECH giants and ARTIFICIAL INTELLIGENCE (AI), there has been a shift in market leadership. We have witnessed a noteworthy rise in performance across diverse sectors such as UTILITIES and ENERGY.

Additionally, sporadic surges have taken place in the FINANCIALS, INDUSTRIALS, and HEALTH CARE sectors, signaling a broader spectrum of market influence. REAL ESTATE stands as the sole sector to suffer LOSSES this year (2024).

U.S. INVESTMENT GRADE BONDS have experienced a slight DIP, while HIGH YIELD and INTERNATIONAL BONDS have inched UPWARDS.

INTERNATIONAL STOCKS have enjoyed GAINS, with DEVELOPED MARKETS SURPASSING their EMERGING MARKET counterparts, mirroring the resurgence of GROWTH in EUROPE juxtaposed with “LACKLUSTER” performance in CHINA.

If you are “LEERY” of over-hyped SILICON VALLEY “DARLINGS”, consider “REASONABLY” VALUED SMALLER TECH COMPANIES WITH GROWTH POTENTIAL.

Economic DECELERATION puts DOWNWARD PRESSURE on BOND YIELDS, with market sentiment interpreting WEAKENING MANUFACTURING OUTPUT and MODERATING INPUT PRICES as “HARBINGERS” of relief in the battle against INFLATION.

The benchmark 30-year U.S. TREASURY YIELD has DECREASED in recent days, a POSITIVE move for EQUITIES (see chart below):

BOND YIELDS and STOCK PRICES tend to move in OPPOSITE DIRECTIONS.

HIGHER INTEREST RATES on essentially “RISK FREE” BONDS ERODE THE PREMIUM investors can expect from “RISKIER” assets such as STOCKS, making it much LESS appealing to purchase shares.

The confluence of these trends may pave the way for “POSSIBLE” RATE CUTS by the FED later this year (2024).

BUT, that is NOT GUARANTEED!!!

The FED’s next policy-making meeting is next week on Tuesday, June 11th- Wednesday, June 12th, 2024; the BOND MARKET is betting that a RATE CUT will NOT occur until September (2024).

In the week ahead, a full week of pivotal ECONOMIC DATA awaits, poised to shape market sentiment leading up to the release of the latest consumer price index (CPI) report on Wednesday, June 12th, 2024.

Of particular interest will be the WAGE GROWTH figure in Friday’s (June 14th, 2024) EMPLOYMENT REPORT, shedding light on the delicate balance between SUSTAINING CONSUMER SPENDING “POWER” and ALLEVIATING INFLATIONARY PRESSURES…

PEACE & BLESSINGS,

Kenneth Reaves, Ph.D.

CEOs Received “HEFTY” Pay Raises in 2023

Tuesday, June 4th, 2024

CEOs Received “HEFTY” Pay Raises in 2023

The typical compensation package for chief executives who run companies in the S&P 500 jumped nearly 13% last year (2023), easily surpassing the gains for workers at a time when inflation was putting considerable pressure on Americans' budgets.

The MEDIAN pay package for CEOs INCREASED to $16.3 million, UP 12.6%, according to data analyzed for The Associated Press by Equilar. Meanwhile, wages and benefits netted by private-sector workers INCREASED 4.1% through 2023. At half the companies in this year’s pay survey, it would take the worker at the middle of the company’s pay scale almost 200 years to make what their CEO did.

CEOs got rewarded as the economy showed remarkable resilience, underpinning strong profits and boosting stock prices. After navigating the pandemic, companies faced challenges from persistent inflation and higher interest rates. About two (2) dozen CEOs in the AP's annual survey received a pay INCREASE of 50% or more.

In this post-pandemic market, the desire is for boards to reward and retain CEOs when they feel like they have a good leader in place. That all combined kind of leads to INCREASED compensation.

BUT many analysts believe, the gap in earnings between top executives and workers plays into the overall “DISSATISFACTION” among Americans about the economy.

Most of the focus here is on “INFLATION”, which people are really feeling, but they are feeling the pain of inflation more because they are not seeing their wages go up enough.

Many companies have heeded calls from shareholders to tie CEO compensation more closely to PERFORMANCE. As a result, a large proportion of pay packages consist of stock awards, which the CEO often can’t cash in for years, if at all, unless the company meets certain targets, typically a higher stock price or market value or improved operating profits. The median stock award INCREASED almost 11% last year (2023) compared to a 2.7% increase in bonuses.

The AP’s CEO compensation study included pay data for 341 executives at S&P 500 companies who have served at least two (2) full consecutive fiscal years at their companies, which filed proxy statements between Jan. 1 and April 30.

Top Earners

HOCK TAN, the CEO of Broadcom Inc., (AVGO) topped the AP survey with a pay package valued at about $162 million.

Broadcom granted HOCKTAN stock awards valued at $160.5 million on Oct. 31, 2022, for the company's 2023 fiscal year. TAN was given the opportunity to earn up to 1 million shares starting in fiscal 2025, according to a securities filing, provided that Broadcom’s (AVGO) stock meets certain targets – and he remains CEO for five (5) years.

At the time of the award, Broadcom’s stock was trading at $470. TAN would receive portions of the stock awards if the stock hit $825 and $950 and the the full award if the average closing price is at or above $1,125 for 20 consecutive days between October 2025 and October 2027. The targets seemed ambitious when set, but the stock has skyrocketed since, and reached an ALL-TIME closing high of $1,436.17 on May 28th, 2024.

Like rival Nvidia Inc. (NVDA), Broadcom (AVGO) is riding the current ARTIFICIAL INTELLIGENCE (AI) frenzy among tech companies. Its chips are used by businesses and public entities ranging from major banks, retailers, telecom operators and government bodies.

In granting the stock award, Broadcom noted that under TAN its market value has INCREASED from $3.8 billion in 2009 to $645 billion (as of May 23rd, 2024) and that its total shareholder return during that time easily surpassed that of the S&P 500. It also said TAN will not receive additional stock awards during the remainder of the five (5) year period.

Other CEOs at the top of AP's survey are:

WILLIAM LANSING of Fair Isaac Corp (FICO), $66.3 million

TIM COOK of Apple Inc. (AAPL), $63.2 million

HAMID MOGHADA of Prologis Inc. (PLD), $50.9 million

TED SARANDOS, co-CEO of Netflix (NFLX), $49.8 million

At Apple (AAPL), Cook’s compensation represented a 36% DECLINE from the year prior. Cook requested a pay cut for 2023, in response to the vote at Apple’s 2022 annual meeting, where just 64% of shareholders approved of his pay package.

The survey's methodology excluded CEOs such as:

NIKESH ARORA at Palo Alto Networks (PANW), $151.4 million

CHRISTOPHER WINFREY at Charter Communications (CHTR), $89 million.

Although securities filings show ELON MUSH received no compensation as CEO of Tesla Inc. (TSLA), his pay is currently front and center at the electric car company. Musk is asking shareholders to restore a pay package that was struck down by a judge in Delaware, who said the approval process for the package was “deeply flawed.” The compensation, mostly stock awards valued at $2.3 billion when granted in 2018, is now estimated to be worth around $45 billion.

CEO pay vs Workers

Workers across the country have been winning higher pay since the pandemic, with wages and benefits for private-sector employees INCREASING 4.1% in 2023 after a 5.1% INCREASE in 2022, according to the U.S. Labor Department.

Even with those gains, the “GAP” between the person in the corner office and everyone else keeps getting WIDER. Half the CEOs in this year’s (2024) pay survey made at least 196 times what their MEDIAN employee earned. That’s UP from 185 times in last year’s (2023) survey.

The “GAP” is particularly WIDE at companies where employees typically earn LOWER wages, such as retailers. At Ross Stores (ROST), for example, the company says its employee at the very middle of the pay scale was a part-time retail store associate who made $8,618. It would take 2,100 years earning that much to equal CEO BARBARA RENTLER’s compensation from 2023, valued at $18.1 million. A year earlier, it would have taken the median worker 1,137 years to match the CEO’s pay.

Corporate boards often feel pressure to keep INCREASING the pay for well-performing CEOs out of “FEAR” that they will walk out the door and make more at a rival.

They focus on paying compensation that is “COMPETITIVE” within their industry or marketplace and not on the “PAY RATIO”. The better an executive performs, the MORE the board is willing to pay.

The disparity between what the chief executive makes and the workers earn was not always so WIDE…

After World War II and up until the 1980s, CEOs of large publicly traded companies made about 40 to 50 times the average worker’s pay.

The (current) “PAY RATIO” signals a sort of a “WINNER TAKE ALL” culture, with companies treating their CEOs like “ROCK STARS” as opposed to, “TEAM PLAYERS”.

Despite the criticism, shareholders tend to give overwhelming support to pay packages for company leaders. From 2019 to 2023, companies typically received just under 90% of the vote for their executive compensation plans, according to data from Equilar.

Shareholders do, however, occasionally REJECT a compensation plan, although the votes are non-binding. In 2023, shareholders at 13 companies in the S&P 500 gave the executive pay packages LESS than 50% support.

After its investors gave another resounding thumbs down to the pay packages for its top executives, Netflix (NFLX) met with many of its largest shareholders last year (2023) to discuss their concerns. It also talked with major proxy-advisory firms, which are influential because they recommend how investors should vote at companies’ annual meetings.

Following the talks, Netflix announced several changes to redesign its pay policies. For one, it eliminated executives’ option to allocate their compensation between “CASH” and “OPTIONS”. It will no longer give out STOCK OPTIONS, which can give executives a payday as long as the stock price stays ABOVE a certain level.

Instead, the company will give “RESTRICTED STOCK” that executives can profit from ONLY after a certain amount of time or after certain performance measures are met.

The changes will take effect this year (2024). For last year, co-CEO TED SARANDOS received “OPTIONS” valued at $28.3 million and a “CASH” bonus of $16.5 million. Co-CEO GREG PETERS received “OPTIONS” valued at $22.7 million and a “CASH” bonus of $13.9 million.

“Say on Pay” votes are important because they shine a spotlight on some of the most “EGREGIOUS” cases of executive excess, and it can lead to negotiations over pay and other issues that shareholders might want to raise with corporate leadership.

Female CEOs

More women made the AP survey than in previous years, but their numbers in the corner office are still minuscule compared to their male counterparts. Of the 341 CEOs included in Equilar’s data, 25 were women.

LISA SU, CEO and CHAIR OF THE BOARD of chip maker Advanced Micro Devices (AMD), was the HIGHEST paid female CEO in the AP survey for the fifth (5th) year in a row in fiscal 2023, bringing in compensation valued at $30.3 million — flat with her compensation package in 2022. Her overall rank rose to 21 from 25.

The other top paid female CEOs include:

MARY BARRA of automaker General Motors (GM), $27.8 million

JANE FRASER of banking giant Citigroup (C), $25.5 million

KATHY WARDEN of aerospace and defense company Northrop Grumman Corp. (NOC), $23.5 million

CAROL TOME of package deliverer UPS Inc. (UPS), $23.4 million

The median pay package for female CEOs increased 21% to $17.6 million. That’s better than the men fared: Their median pay package increased 12.2% to $16.3 million.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

The Ask The Wiz Wealth Institute is not an investment advisor. We strive to be educational and informative community servants.
 

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