The Man with the $200 Million-a-Year Paycheck
An ugly internal squabble at a prominent American investment firm has put a spotlight on the co-founder's salary, a reported $200 million a year.
The salary paid to Pimco co-founder and chief investment officer Bill Gross in 2012 is the equivalent of about 2,000 teachers' salaries for a year, notes an independent trustee of the firm, who spoke out to The Los Angeles Times.
In fact, a California teacher with a salary in the mid-range for public schools in the state made about $64,000 in 2012. So, Gross' pay actually equals the annual salaries of about 3,125 teachers.
Alternately, it would pay the salaries of 2,941 registered nurses for a year. Or, it could pay the salaries of about 21,000 minimum wage workers, if their pay rate was increased to the proposed $10.10 federal minimum per hour.
Gross is known around Wall Street as "The Bond King." His company is the world's largest bond fund, with nearly $2 trillion in assets. He built his reputation on his company's Total Return Fund, which outperformed its rivals for three decades-until 2011 and 2012, when it began performing poorly in comparison to its peers. It lost 1.92% in 2013, a performance that was worse than 70% of its peers.
Most recently, in the month of February 2014, the fund's performance again trailed 70% of its peers, according to figures compiled by Reuters.
How Gross' Pay Compares
The average pay package of a CEO for a S&P 500 company in 2012 was $13.7 million, according to figures compiled by GMI Ratings, which tracks salaries at the top of corporate America.
The top 10 made much more, of course, by cashing in the vast piles of stock options they received over and above their relatively modest salaries. Facebook founder and CEO Mark Zuckerberg topped the list in 2012 at $2.27 billion in compensation.
Long-time Pimco trustee William J. Popejoy now says the salary earned by Gross is due for a review.
Popejoy told CNBC he thinks the right number might be about $20 million. That's the salary received by the CEO of BlackRock, a leading investment company with double the assets of Pimco.
In the interview with The Los Angeles Times, Popejoy scoffed at Gross' reported description of himself as a kind of investing-world Secretariat. Popejoy said he doubted that the legendary U.S. Triple Crown-winning thoroughbred racehorse ever made $200 million.
In fact, Secretariat earned about $860,000 in his top-earning year, 1973.
Behind Doors with The Bond King
In the same interview, Popejoy called Gross' recent performance "mediocre."
Gross' pay package was revealed after the abrupt departure of Mohamed El-Erian, the firm's chief executive and once heir apparent to Gross, who is 69.
The Wall Street Journal followed up with a scorcher of an article depicting Gross as an out-of-control bully in his treatment of company managers and even El-Erian, particularly since the company's performance began to decline in 2011.
As his company's performance wanes, even Gross appears to have rethought that comparison to Secretariat. In a note to investors last April, he mused that his earlier successes, during the boom years for bonds, might have blinded him: "Perhaps... it was the epoch that made the man as opposed to the man that made the epoch," he wrote.
According to CNBC.com, several large institutional investors, such as the state of Florida, have placed Pimco on their "watch lists" and are "closely monitoring the developments" at the firm.
Pimco, known formally as Pacific Investment Management Co., is owned by German financial services company Allianz SE. It is based in Newport Beach, California.