David Chun is the founder and CEO of Equilar, one of the most trusted names in the corporate governance community. He has been recognized as one of the most 100 influential players in corporate governance by the National Association of Corporate Directors (NACD). In this episode we discuss David’s journey to founding Equilar and how bringing together all the incredible data helps drive better board composition and better corporate governance.
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Quotes
Founding of Equilar
worked in investment banking for DLJ (Donaldson, Lufkin & Jenrette), and that was really the transformative experience for me to really learn about data, what’s out there. I spent a lot of time going through SEC filings and recognized that, “Hey, there’s an opportunity to potentially build the business around this data.
In ’97, my wife and I moved out to California to help open up the DLJ Menlo Park office right in the heart of Silicon Valley, and when you’re out here, especially in the late nineties, everybody wanted to start a company and so I said, “Hey, it’s not going to get any easier for me. Let’s go ahead and let’s give it a shot.”
It looks a lot easier from the outside, but kind of once you get in you’ll realize, “Wow, it is hard.” That’s the reason 90-plus percent of businesses never make it beyond a couple of years.
I just happened to be at the right place at the right time with the executive compensation data that is essentially the foundation of our business.
Raza
David, Joe and I have often talked on this podcast that the old excuse of “we can’t find enough qualified” candidates is no longer really available, and I think what you’re doing is the last mile step in bringing that to fruition!
David
It’s big data opportunity where there are, like I said, 1.2 million candidates. Having a lot of data is not the answer. The key is getting to the right data as quickly as possible, and so literally when somebody says, “I can’t find candidates,” I say, “Hey, do you have 10 seconds?”
You can get binders of information about women, but if you’re not able to figure it out how you may be potentially connected to that individual, those binders and those lists are not that valuable because what people are looking for is not only to show me candidates, but is there some level of connectivity to them?
Rate of increase in women directors of public companies
The rate of change is pretty much at parity now, so its one-to-one so as new board seats are being refilled, roughly a 50/50 balance, and we should reach parity by around 2030.
Big Ideas/Thoughts
We mine the compensation that’s disclosed in annual proxy filings. We also have our proprietary survey where we collect data compensation, that data that companies provide as part of a broader survey, and we’ve got close to a thousand companies that use our data for various benchmarking purposes.
You’ll see us often cited in The New York Times, the Wall Street Journal, CNBC and others, where they’re looking for pay statistics
We have over just across 1.2 million profiles in our dataset of anyone who’s been an executive or board member of a public company, private company non-profits and others, and so we are excited about how that’s become, also a way to better serve our clients. As we all know work diversity is a very hot topic right now on the agenda of every board, public, private, nonprofit, and others.
Within our BoardEdge product, we built up the Equilar Diversity Network where we partnered with over 50 different organizations to help match the demand and the supply for diverse talent,
We also allow people to claim their profiles, so people have gone in, they’ve enriched and particularly added important metrics like their ethnicity or their sexual orientation and disability, veteran status, because what we want in a company, we want to make it much easier for our corporate clients and search firms and others who use our database to find these candidates.
Partnership with NASDAQ
That’s when we found out that this was happening, and what we feel really great about is that since NASDAQ was using our products and they had this big vision of what the big broader ESG vision and my guess, and I don’t know this for sure, but behind the scenes over at NASDAQ, when they were putting this together saying, “Hey, if we’re going to go out this and ask NASDAQ-listed companies to set a new standard, how do we help them?” And I think that’s honestly maybe where Joan said, “Hey, we’ve been using Equilar. It’s a great database. Let’s work out some type of partnership with them.”
So, yeah, we’re honored to be part of that, to be working with them with all of their listed companies, and NASDAQ being technology is very focused on ESG. It blends in well with both what we’re doing. They’re able to offer to their companies, “Here’s a resource. If you don’t have the requisite diversity or you want more diversity, here’s a place you can go to get it.”
We talked about earlier was one of the things that really strikes me is that one of the great strengths is that you can enhance the database of virtually any other company, so they don’t see you as a competitor to them. executive search, private equity well, of course they have their own database any relationship-based business where relationships play a critical part of one’s offering.
we have our network center, and so that’s where our clients are maintaining their pipeline of candidates. So ,every quarter, when a nom/gov committee meets, they can export that and they can be assured that everything has been updated
Without question, the tragic events that have happened, let me show you the dates. It was summer 2020 with George Floyd and the whole Black Lives Matter movement, and that was a wake-up call for corporate America and just recognizing, “Hey, have we done enough? What are the things that we could do differently?” the rate of change has probably doubled so that’s a pretty substantial increase over a year.
A lot of boards really took that to heart and there’s been a big push to bring. African-American and Black individuals into the boardroom, so that’s tremendous progress there. I also would add to that, about four or five years ago, we launched the gender diversity index, and so we’re looking at the rate of women on boards. When we looked at this, when we first calculated, I think it was like fall of ’16, beginning of ’17, I don’t know if I’m getting the dates right, roughly 25% of the Russell 3000, so over 750 companies did not have any women on their board
Wow.
And it wasn’t that long ago.
They shared it with me, I said, “This can’t be right. We can’t publish this. I’ve got to see the data,” and so they shared the file with me, and I started going through them. I didn’t go through all 750, but I went through about 20 to 30 of them, and I’m like, “Oh, my God, this is right. This is really the state of play.
this stunning statistic that over a million men joined the labor force last month that are taking a job or looking for one compared to only 39,000 women. What explains it then? How does that fit into the diversity push in general?
Yeah. To be able to fill those board seats, you’re going to need to have a pipeline of women executives that are going to be quote unquote “board ready.” And if you’re not having as many women coming back into the workforce, that pipeline is just going to get thinner and thinner.
Episode Transcript:
Joe: [00:00:00]
Hello and welcome to On Boards, a deep dive at what drives business success. Hi, I’m Joe Ayoub and I’m here with my co-host. Raza Shaikh. On Boards is about boards of advisors and directors and all aspects of governance. Twice a month this is the place to learn about one of the most critically important aspects of any company or organization: its board of directors or advisors, as well as the important issues that are facing boards, company leadership and stakeholders.
Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it takes to be an effective board member, what challenges boards are facing and how they’re assessing those challenges, and how to make your board one of the most valuable assets of your organization.
Joe: Our guest today is David Chun. David is the founder and CEO of Equilar, one of the [00:01:00]most trusted names in the corporate governance community. He has been recognized as one of the most 100 influential players in corporate governance by the National Association of Corporate Directors (NACD).
He was recognized with the Disruptor Award by the 2020 Women on Boards and was named one of the outstanding 50 Asian-Americans in business. David speaks regularly on corporate governance and board diversity matters, including events hosted by the Conference Board, Deloitte, Ernst & Young, KPMG, NACD, NASDAQ, the New York Stock Exchange, the Society for Corporate Governance, and Stanford’s Directors’ College.
David serves on the boards of the Commonwealth Club of California, PGA REACH, the Silicon Valley Leadership Group, and is a trustee of Committee of Economic Development (CED). [00:02:00]He is on Catalyst Women On Board Advisory Council, and also serves on a number of other initiatives and boards. He’s also a founding member of the Council of Korean-Americans (CKA), and former board member of the Wharton Center for Entrepreneurship and Asia-Pacific Fund Community Foundation of San Francisco.
Welcome, David. Thank you so much for joining us today on On Boards.
David: Great, thank you, Joe and Raza, I appreciate the opportunity to be here.
Raza: David, can you tell us a little bit about your background before you founded Equilar?
David: Well, I was born in Korea, grew up in Northern New Jersey. Our ticket out of Korea was my dad being able to get a scholarship to study at the Fairleigh Dickinson University in Rutherford. I grew up in New Jersey. I did my undergrad at the University of Virginia and was fortunate that after business school, right after undergrad, to work in consulting at Bain in Boston.
Then worked at a [00:03:00] software company before going back to business school at Wharton and then went back to Wall Street. I worked in investment banking for DLJ (Donaldson, Lufkin & Jenrette), and that was really the transformative experience for me to really learn about data, what’s out there. I spend a lot of time going through SEC filings and recognize that, “Hey, there’s an opportunity to potentially build the business around this data.
In ’97, my wife and I moved out to California to help open up the DLJ Menlo Park office right in the heart of Silicon Valley, and when you’re out here, especially in the late nineties, everybody wanted to start a company and so I said, “Hey, it’s not going to get any easier for me. Let’s go ahead and let’s give it a shot.”
It looks a lot easier from the outside, but kind of once you get in you’ll realize, “Wow, it is hard.” That’s the reason 90-plus percent of businesses never make it beyond a couple of years.
But we were fortunate enough that we happened to be in the right place at the right time. I stumbled in this corporate governance arena in 2000-2001, literally, as Enron [00:04:00] and Andersen and some of those corporate governance issues that came to the surface, I just happened to be at the right place at the right time with the executive compensation data that is essentially the foundation of our business.
Raza: And that’s when you founded Equilar, David. Maybe talk about what Equilar is today, your product and your customers.
David: Yeah, absolutely. The core part of our business is around compensation data. We mine the compensation that’s disclosed in annual proxy filings. We also go through a case or reports. We also have our proprietary survey where we collect data compensation, that data that companies provide as part of a broader survey, and we’ve got close to a thousand companies that use our data for various benchmarking purposes.
You’ll see us often cited in The New York Times, the Wall Street Journal, CNBC and others, where they’re looking for pay statistics, and while collecting the compensation data, we’ve been building people database in the background, and so that’s allowed us to launch our next product, [00:05:00]which is called BoardEdge, and companies are using that to be able to source board candidates.
We have over just across 1.2 million profiles in our dataset of anyone who’s been an executive or board member of a public company, private company non-profits and others, and so we are excited about how that’s become, also a way to better serve our clients. As we all know work diversity is a very hot topic right now on the agenda of every board, public, private, nonprofit, and others.
Within our BoardEdge product, we built up the Equilar Diversity Network where we partnered with over 50 different organizations to help match the demand and the supply for diverse talent, and so we’re pretty excited and proud of what we’ve been able to accomplish in that area.
Raza: David, that sounds tremendous. It sounds like it’s an aggregation of a lot of data, not only available publicly, but also proprietary data sets. Are you bringing that data in and then [00:06:00]enriching it with more information to provide it in a more useful manner?
David: Yeah, absolutely. What we do is we’re aggregating information that’s publicly available, whether it’s an SEC filing, corporate websites, various public sources. We also allow people to claim their profiles, so people have gone in, they’ve enriched and particularly added important metrics like their ethnicity or their sexual orientation and disability, veteran status, because what we want in a company, we want to make it much easier for our corporate clients and search firms and others who use our database to find these candidates.
We’ve made it very easy. We don’t charge candidates to come in and claim their profile. We encourage people to add it because when that company says, “Hey, we’re looking for a woman who is Asian, black, or Hispanic,” we want to show as many qualified candidates as possible and not struggling and have to find them.
Raza: David, Joe and I have often talked on this podcast that the old excuse of “we can’t find [00:07:00] enough qualified” candidates is no longer really available, and I think what you’re doing is the last mile step in bringing that to fruition. What do you consider when you say the last mile problem that Equilar helps solve?
David: Yeah. It’s a digital solution. It’s technology. It’s big data opportunity where there are, like I said, 1.2 million candidates. Having a lot of, data is not the answer. The key is getting to the right data as quickly as possible, and so literally when somebody says, “I can’t find candidates,” I say, “Hey, do you have 10 seconds?”
We show them our search page, click a couple of buttons and then like, “Oh my God, there are so many people.” And then what I love was when people are like, “Oh, there’s so-and-so, I forgot about so-and-so. I forgot about this person. I forgot about that.” But it’s not only that, but then the other piece that Raza talked about solving that last mile, as you know, there are lists of people out there everywhere, you know, borrowing[00:08:00] Governor, or I guess now Senator Romney binders of women. You can get binders of women in front of you, but if you’re not able to figure it out how you may be potentially connected to that individual, to be honest with you, those binders and those lists are not that valuable because what people are looking for is not only to show me candidates, but is there some level of connectivity to them?
That’s what we’re solving it is that not only do we have 1.2 million profiles, but we have over a hundred million connection relationship pairs, so that those, let’s say, 50 women that come up and match the search, we can show a path from a company’s board where they may have a point of connectivity to that individual, and I think that’s a critical piece that we’ve solved.
Raza: You would say way better than LinkedIn.
David: Yeah. I wish we could say that. LinkedIn is a tremendous database, but as you know, LinkedIn is it’s opt-in so frankly a lot of the candidates that people would like to potentially recruit aren’t frankly on LinkedIn or aren’t that active, and let’s face it, what’s happened with [00:09:00] LinkedIn is that I don’t know how many connections I have right now, but how many of those connections I really know well? I’ll meet people and I’ll say to them, “Hey, I noticed that we have so-and-so on the job, and I get this glazed look like, “Who?”
There’s quite a bit of noise in LinkedIn, and what we do is we’re not going to try to show them a lot of relationship pairs. We want to show really high quality ones of like you are on the board of this company with this individual between these dates and to be able to provide that context.
Raza: I think that’s such a tremendous value because you’re absolutely right that although LinkedIn is really large, the relationships are not necessarily reflective of true relationships.
Joe: I want to just confirm something though. All the data that you have in your database is publicly available. You said proprietary before.
David: Let me clarify. Thanks, Joe. On the compensation side, we do a proprietary survey because what’s in the SEC filings, companies are required to disclose the five highest paid executive officers. It’s often [00:10:00] referred to as the NEO, the named executive officers. Our clients actually came to us and said, “Hey, what you have collected on the public side. It’s great, but I need more data.”
A good example would be, so the way the SEC rules work, of the five, the CEO and CFO are required to be disclosed. The next three are all over the map. It could be your general counsel one year. It could be your head of sales one year. It could be your CMO . It could be your head of HR.
If you’re only using the SEC data for those, let’s say, you want to benchmark your GC, you’re going to naturally skew high because it’s only going to be the highest paid GCs that gets disclosed. What has happened is we now have the GC data for pretty much everybody, for within large and mid cap audience and so you get a much more accurate view if you’re trying to benchmark what the GC should get paid. That’s the proprietary data where we’re collecting compensation data that’s not publicly available.
The other piece I should clarify though on the Board Edge [00:11:00] recruiting side, there is some proprietary data that we do collect where individuals come in and they claim their profile so they’ll add information, for example, like the ethnicity and sexual orientation, because we’re not guessing that stuff, so we’re letting people, ” Hey, if you want to add that, that’s yours.”
Then what’s shared when somebody uses that, w e provide the source of every data element, where it comes from. Did it come from, you know, and you can click to the SEC file that shows where it came from. If the user provided it, we’ll say source the user’s name.
Joe: None of it is private in the sense that whatever is not actually public has been shared with you by the person that has the information. That’s really important for people to understand.
David: Yeah, exactly. We don’t let people go in. It’s not a Wikipedia. We don’t have people adding stuff to somebody else’s profile. It’s really, “Okay, your profile, you own it, and you decide what you want to add to it.”
Joe: So, let’s talk about the partnership with NASDAQ, because I found that fascinating. Talk about how that came about, when it came about and what drove it.
David: Yeah, okay. NASDAQ has been a tremendous partner for a [00:12:00] number of years and we co-host the Board Leadership Farm at the Market site. Fingers crossed, we’ll be able to be there again on April 5th and so we’ll have that one coming up.
But they also use our products, and so Joan Conley, their corporate secretary, big fan of our database, she had used it for her own board searches for NASDAQ’s own board. In the summer of 2020, NASDAQ contacted us and they said, “Hey, we want to partner with you and Roger at BoardEdge.” we had no idea what was going on at the time, and we’re like, “Sure, why not? People know NASDAQ, and yeah, let’s do something there.”
Then, as we all know, at December of 2020, the NASDAQ made their announcement and saying, “Hey, going forward, NASDAQ-listed companies will now going to be required to disclose the make up of their board and will need to include a woman and a person from one of the underrepresented groups, an ethnic group or LGBTQ, and if the board does not have the two diverse candidates, well, they would need to explain why they don’t have the two diverse candidates.”
That’s when we found out that this was happening, and what we feel really great about is that since NASDAQ was using our [00:13:00] products and they had this big vision of what the big broader ESG vision and my guess, and I don’t know this for sure, but behind the scenes over at NASDAQ, when they were putting this together saying, “Hey, if we’re going to go out this and ask NASDAQ-listed companies to set a new standard, how do we help them?” And I think that’s honestly maybe where Joan said, “Hey, we’ve been using Equilar. It’s a great database. Let’s work out some type of partnership with them.”
So, yeah, we’re honored to be part of that, to be working with them with all their lists of companies, and NASDAQ being technology is very focused on ESG. It blends in well with both what we’re doing.
Joe: They’re able to offer to their companies, “Here’s a resource. If you don’t have the requisite diversity or you want more diversity, here’s a place you can go to get it.”
David: And beyond, you need help on your board search process. It’s not limited to just that, and full disclosure, we do give trials, so we give three-month trials to all NASDAQ-listed companies who want to try for it, and it’s up to them if they want to continue to have access, but as part of this is that [00:14:00] NASDAQ-listed company has access to this database for a relatively short period of time to be able to get enough data out, to be able to build a pipeline of candidates.
But the product is more than just sourcing candidates because there are competitive intelligence that we are able to track that they get alerts around changes across their peer group, like board members that have been added or have a step-down executive transition. There’s quite a bit more than just sourcing candidates as part of the overall solution.
Joe: Real-time updates on people’s status.
David: Personal changes. Yeah, exactly. And frankly, some of the changes that we track, we never make a press release. If somebody is a chief marketing officer was taken off a website, it’s like, “Oh, what happened there?” But that is a part of the intelligence that we’re tracking.
Joe: Yeah. We talked about earlier was one of the things that really strikes me is that one of the great strengths is that you can enhance the database of virtually any other company so they don’t see you as a competitor to them. Example, [00:15:00] that some people might think about executive search, well, of course they have their own database, but some of them actually come to you and enhance their database.
David: Yeah, absolutely. It goes beyond executive search. It’s private equity space. If you think about any relationship-based business where relationships play a critical part of one’s success. Because what we’re breaking is not only backgrounds and profiles of individuals, but also their network that we’ve captured of overlapping work histories where they’ve been on boards together, where they’ve been executives together. We’ve had this over the last 20 years.
That ability to enrich and enhance, it’s actually pretty horizontal play which we’re pretty excited about and you’ll see over the course of the year, some exciting partnerships we’ll be announcing.
Joe: Yeah. And one of the things you had mentioned about board recruiting is I think people that do it know it’s not a one-and-done deal. You go get a candidate and now you’re done, now you don’t need the resources. What you’re basically offering [00:16:00] is the opportunity to maintain a fresh list of candidates at all times, so that if you’re doing the right governance stuff and you’re looking at your board every year or your nom/gov committee is you can always be refreshing your board by looking at a very, very robust database to access who might be a good fit for your company.
David: Yeah, Joe, you nailed it on the head because within our platform, we have something, we call our network center, and so that’s where our clients are maintaining their pipeline of candidates. So ,every quarter, when that nom/gov committee meets, they can export that and they can be assured that everything has been updated, so that if since the last board meeting, if somebody either joined a new board, stepped off a board, they don’t have to recreate that profile and we’re maintaining it, and anyone who’s in that pipeline of candidates, they’re getting alerts like, “Hey, this candidate who said he or she wasn’t available, now, all of a sudden is,” like, “Hey, I just noticed that you just stepped out of, you know. Let’s catch up.”
Joe: Incredibly powerful resource.
Raza: David. Equilar [00:17:00] also has a partnership with NACD. Could you talk a bit about that as well?
David: Yeah. So that just got announced. I believe that was December, but NACD has a certification program. They have related initiative called Accelerate, and so we’re excited. I think everyone listening to this podcast is probably familiar with NACD, and so just like NASDAQ, it’s a great brand to be associated with.
We’re helping that rising to the next level of candidates and just exposing them and making sure that our clients are able to search and identify them.
Joe: One of the things you said in talking about what you’ve built is that relationships opened the doors for your family and for you, and it’s kind of how the world works and I kind of love the way you’re thinking about that. Along those lines, the way we met you was through a woman who was a guest of ours not long ago by the name of Lisa Shallett and I know that you were instrumental in helping her launch what has become Extraordinary Women on [00:18:00] Boards.
David: Yeah, absolutely. Lisa and I were introduced probably five or six years ago through a mutual friend and Lisa has become a great champion, supporter and dear friend of us.
But yeah, I think about my journey, as I mentioned, we came from Korea in 1968 and now sitting on a podcast with you guys to talk about boards, and how did I get here? So much of it is just along the way, just people like Lisa and others that I’ve met who’ve been very kind and generous with their time to make introductions to other people because we all know a warm introduction is so much more effective. Like if I came to you guys and said, “Hey, I want to be on your podcast,” you’d be like, “Who is this guy, like why would we do that?
Joe: That’s not true.
David: Right. By hearing it from somebody who’s credible, a former Goldman Sachs partner who sits on multiple boards say, “Hey, this is a great person to be associated with.” And so, yeah, I just think for me personally, it’s been people like Lisa who’ve opened doors along the way. That’s really where I am passionate about our economy [00:19:00] is to help people identify how they can find people, friends within their network who can open up more doors for them to help accelerate their career progression so that’s what I’m very excited about because so much of it is, especially in the Zoom world, we’re starting to be able to do breakfast, dinners and lunches and stuff like that, but being able to find people within your network.
Raza: David, I can also testify here as a guy coming as an immigrant here and doing a podcast. That’s also because how I met Joe and we decided to do this podcast.
Joe: Yeah, exactly. That’s a great example.
So let’s talk about some trends. We have a few things that you had mentioned and a couple that we’ve picked up. When we talked last week and we said, “What’s the number one trend that you’re seeing the most powerful or impactful trend? I think you mentioned the rate of acceleration of black directors joining boards, which really struck me so talk about what you’ve seen, what the numbers look like, why it’s at the top of the list for you.
David: Yeah. Without [00:20:00] question, the tragic events that have happened, let me show you the dates. I think it was summer 2020 with George Floyd and the whole Black Lives Matter movement, and that was a wake-up call for corporate America and just recognizing, “Hey, have we done enough? What are the things that we could do differently?”
A lot of boards really took that to heart and there’s been a big push to bring. African-American black individuals into the boardroom, so that’s a tremendous progress there. I also would add to that, about four or five years ago, we launched the gender diversity index, and so we’re looking at the right of women on boards. When we looked at this, when we first calculated, I think it was like fall of ’16, beginning of ’17, I don’t know if I’m getting the dates right, roughly 25% of the Russell 3000, so over 750 companies did not have any women on their board
Joe: Wow.
David: And it wasn’t that long ago.
Joe: I would just kind of say that’s not that long ago.
David: That’s not that long ago. And to be honest, our analyst ran the numbers and they shared it with me, I said, “This can’t be right. We can’t publish this. I got to [00:21:00] see the data,” and so they shared the file with me and I started going through them. I didn’t go through all 750, but I went through about 20 to 30 of them, and I’m like, “Oh, my God, this is right. This is really the state of play.”
Not only that, but also the other issue was the rate of refreshment, meaning new board seats, what was the rate of male versus female? It was four to one, male to female. Some simple math, we weren’t going to reach gender parity until 2050, so that was something that’s just like A, the numbers were pretty rough, it wasn’t going to change that quickly.
Now the rate of change is pretty much at parity, so one-to-one so as new board seats are being refilled, it’s roughly a 50/50 balance, and we should reach parity by 2030, somewhere give or take.
Joe: Is that public company, private company, or both?
David: That’s public company and a broader that’s looking at the Russell 3000. By publishing the gender diversity index, you manage what you measure. Sunshine is the [00:22:00] best antiseptic, whatever you want to call it, but it definitely has gotten a lot of attention and we’re excited about how we’ve been able to run these numbers every quarter and be able to keep this in front.
Joe: I just want to go back to the rate of acceleration of black directors. I thought when we talked last week, you had pretty stunning number. Did you remember what it is?
David: Yeah, since we last connected, it was Fortune 500 boards or Equilar 500, whichever are 500 largest companies. It was 9% a year ago. We’re now up to 11% so the rate of change has probably doubled so that’s a pretty substantial increase over a year to go from 9 to 11. So yeah, there’s definitely quite a bit of activity
Raza: David, I just saw this stunning statistic that over a million men joined the labor force last month that are taking a job or looking for one compared to only 39,000 women. What explains it then? How does that fit into the diversity push in general?
David: Yeah. To be able to fill those board seats, you’re going to need to have a [00:23:00] pipeline of women executives that are going to be quote unquote “board ready.” And if you’re not having as many women coming back into the workforce ,that pipeline is just going to get thinner and thinner.
Why is it that more women are not able to get back into the workforce? Obviously, we’re not through COVID and you hear about Chicago school shutting down, people getting sick and whatnot, and the reality is a lot of that, the support and care often falls on the mother, the wife, and it’s unfortunate that that’s now translating into who’s able to go out and work. Hopefully, we’ll be able to find ways to get those numbers back up to parity.
Raza: David, Equilar did a comprehensive pay study with New York Times on the state of CEO competition. Give us the highlights, what did you guys find?
David: Yeah. The reality of CEO pay is that it rarely goes down, and that’s just the reality. The last time we did see a downturn was in the financial crisis of ’08-’09. What’s [00:24:00] especially happened in the last year or so in this war for talent. It’s not just the rank and file, it’s also the C-suite.
What you candidly have out here, I’m out here in Silicon Valley, and you’ve got the FAANG companies, and whether that’s Facebook/Meta, Google/Alphabet and others, there’s such a war for talent and you’re seeing that also in CEO pay packages, and there is, which we’ll often hear from, the Elon Musk package, and you’ve seen other executives look at that and say, “Hey, I’m the next Elon Musk.”
That’s happened, and there are companies that, as you go through the SEC filings, you’ll see that there’ll be a ladder of option grants that vest depending on stock price performance and other operating metrics, but like you said, that war for talent goes beyond just the rank and file.
Joe: But it also shows that the gap between what CEOs are getting for compensation and pretty much everyone else really widened during the pandemic. Why so much in such a short period of time?[00:25:00]
David: Yeah. That’s a great question, Joe. Honestly, I don’t think it’s the rate of change. I’d have to go back and look at the numbers. It may seem that the disparity has gotten bigger. Well, a lot of it, there’s annual compensation and then there’s wealth.
The wealth side, that disparities is certainly larger without question, and that is because of the outperformance of the stock market, and what drove that? It’s the fiscal monetary stimulus, 0% interest rates, trillions of dollars of money going into the economy. You definitely saw equity values just go up tremendously.
On the compensation side, I think that’s really more the annual comp side where the boards want to retain these key executives and they’ve put together these larger equity packages to retain them. Like I said, there’s that concept of the “Elon Musk package,” which has certainly been debated in boardrooms, especially here in Silicon Valley.
Joe: Hey, tell the folks that are listening, what is the Elon Musk package?
David: Yeah, Elon Musk, god, I don’t know how many years ago. I think it was about five years ago. The board wanted to [00:26:00] retain Elon Musk and they put together a package, he said, “Okay, I’d like to get a package of equity grants,” and basically, a ladder of grants depending on where the stock price is, and I believe there’s some operating performance metrics, but the grants don’t vest unless the stock hits their thresholds and trades over that threshold for generally 20 days. And at the time, and I have to go back and look at the numbers here, but I believe the face value of the package was like $2 billion at the time. But as we all know he’s worth a couple of hundred billion now today because those values were the option grants that were discounted back, but now that those options or several of the traunches are in the money, his wealth has obviously increased quite substantially.
Joe: It’s a good package.
David: Yeah. It was a very controversial package. And the reality is the investors approved it. It was put to a vote and the flip side of it is, if that stock price gets to where it is a thousand bucks [00:27:00]a share, I’m going to be happy. I can’t remember what it was but as an investor…
Raza: I think it was before the 420 price.
David: Yeah, before the 420. I think it was somewhere in like a double digit stock price when this was put together. The thing about that comp is that you could have a hundred people in a room and you have 110 opinions about this. Again, at the end of the day, there are a number of shareholders, frankly, who are very happy and they’re like, “Hey, Elon deserves every penny of it.” But I’m not saying that I’m in that camp. I’m just saying here are the various opinions around.
Joe: Does it go down to the whole C-suite? I thought you may have said that earlier, or is it primarily focused on the chief executive?
David: Our compensation to our C-suite is what we track.
Joe: David, it’s been absolutely fascinating speaking with you. Thanks so much for joining us today.
David: Thank you, Joe. Thank you. Raza. I really appreciate the opportunity and looking forward to doing more with you guys.
Joe: Thank you all for listening to On Boards with our special guest, David Chung.
Raza: We have. a request for our listeners. Please take a moment to rate and review On Boards on Apple Podcast app if you [00:28:00] enjoyed listening. It really helps others discover our podcast. Also you can visit our website at onboardspodcast.com. That’s onboardspodcast.com. We’d love to hear your comments, suggestions, and feedback.
Joe: Please stay safe. Take care of your families, yourselves and your communities, and Raza, you take care, too.
Raza: You, too, Joe.
Joe: Thanks.