Ahead of the Walt Disney Company’s expected quarterly earnings report next week, Abigail Disney, the granddaughter of company co-founder Roy Disney, wrote a Washington Post piece titled: “It’s time to call out Disney—and anyone else rich off their workers’ backs.”
In it, she calls out the “naked indecency of chief executive Robert Iger’s pay,” which was $66 million last year, and other executives’ “seven- and eight-figure paychecks.” She suggests that Disney start remedying the problem by slicing their bonuses in half and distributing the money to the lowest-paid 10% of its workers.
Corporate wealth is an easy target. But Ms. Disney’s attack on the company that bears her family’s name (she does not work for Disney) is misguided and lacks crucial context.
Amid her criticism, Ms. Disney concedes the talent of the company’s leadership. “I’m not arguing that Iger and others do not deserve bonuses. They do. They have led the company brilliantly.”
This praise is gracious, but it doesn’t fully capture just how incredibly successful Iger’s team has been. Avengers: Endgame just had the largest-ever North American film debut, earning $1.2 billion globally. Iger has masterfully integrated the creative engines of Marvel, Pixar, and Lucasfilm while reviving Disney’s own legendary studio and theme parks. His purchase of 21st Century Fox has transformed the entertainment industry, and the coming Disney+ subscription video service has blunted threats from Netflix and Amazon.
Disney’s stock is trading at historic highs surpassing $130 a share. When Iger became CEO in 2005, the stock was trading at just $24. The company’s market cap has increased $47 billion in the past six weeks alone. Total shareholder return over Iger’s tenure as CEO is 578%, compared to just 140% for the S&P 500. More than 70,000 jobs have been added to the company since Iger became CEO and the end of fiscal year 2018.
For such results, Iger’s performance-based total compensation hit $65.6 million over the past fiscal year. That sounds extremely generous on its face, but the number must be evaluated in context. Plenty of CEOs of hedge funds—which create no products or services—earned between $1 and $2 billion over the same period. Just looking at the past year, Disney’s stock was up 36%; the S&P 500 was up 12%.
The problem of excessive executive compensation extends far beyond Disney—and in her public criticism, Ms. Disney has chosen the wrong target. Many boards consistently reward poorly performing CEOs. But when pay and performance is properly aligned as it is at Disney, we need to recognize it. In 1930, when Babe Ruth was criticized for asking for a $80,000 salary, more than the president at the time, Herbert Hoover, the slugger famously retorted: “I had a better year than he did!”
Ms. Disney’s argument may appear progressive—but it’s far from it. Actually, the American progressive movement of the early 20th century was sparked by reformers who believed in improving the plight of workers through, among other things, increased pay for high performance. This stood in contradiction to the values of agrarian populists and urban socialists, who believed in uniform wages regardless of performance.
For all of her frustration with the storied company, it does not sound like Ms. Disney is advocating for a socialist reorganization of the economy. If that’s not her solution, then she should look to another pillar of American capitalism: philanthropy. If she would like to see real change in alleviating poverty, she should focus instead on giving.
Jeffrey Sonnenfeld is the senior associate dean and the Lester Crown professor of management practice at the Yale School of Management, as well as author of The Hero’s Farewell: What Happens When CEOs Retire.
This article is commentary. For more opinion in Fortune, click here.