Papa John's CEO says executive salaries are 'immoral' and give corporate America a bad name
Reuters John Schnatter, founder and CEO of Papa John's Pizza.As a CEO worth $710 million, Papa John's founder John Schnatter isn't someone you'd expect to hear speaking out against overpaid executives.
However, as he witnesses what he believes to be a divided America, Schnatter has decided its time to take a stand.
"It's an immoral arrangement. It's wrong," Schnatter told Business Insider. "And that's why corporate America has got a bad name."
He's putting his money where his mouth is. The CEO and founder says he is paid just 20% of what the Papa John's board has determined his leadership is worth.
"I pay myself three, three and half million - which is plenty of money, c'mon," Schnatter said. "I haven't taken a raise probably in two, three, four years. The board gets upset because I won't take a raise, but I've got plenty of money."
A CEO turning down millions of dollars sounds like a tall tale. However, the company's SEC filings back up Schnatter's claim, with a 2016 filing stating that while his "outstanding performance" warranted a raise, the CEO asked the board to focus raises on the rest of the executive leadership team.
Kate Taylor
According to the filing, Schnatter received $3.6 million in executive compensation 2015, most of it in the form of stock and stock options.
For comparison, in 2015, Chipotle paid co-CEOs Steve Ells and Monty Moran (who left the company in late 2016) $13.8 million and $13.6 million respectively. This was actually a major pay cut for the burrito chain executives - in 2014, Ells earned $28.9 million and Moran received $28.1 million.
Starbucks CEO Howard Schultz earned $20.1 million in 2015, and Greg Creed, the CEO of Yum Brands (Taco Bell, KFC, and Pizza Hut's parent company), earned $7.5 million.
"Mercer [Consulting, a group that studies executive compensation] said my value to the company is worth $12 to $18 million annually," Schnatter said. "If I paid myself that kind of money my employees would, A, hate me and B, there wouldn't be enough left over for them to motivated."
This employee motivation refers to Papa John's bonus plan, something Schnatter spells out in his new book 'Papa: The Story of Papa John's Pizza'.
According to Schnatter, roughly 30% of Papa John's annual profits are immediately set aside for bonuses. In 2015, that meant $60 million in bonuses was divvied up between workers at all levels of the company. No manager or executive can receive a bonus unless people working under them do - something intended to create a more collaborative culture across Papa John's.
It's not a perfect plan. While Papa John's can provide guidance to franchisees, the company cannot control how much non-corporate store owners play employees - something that has got the company in hot water in 2015 when a franchisee was jailed for failing to pay workers minimum wage and overtime.
Still, Schnatter believes that sacrificing pay and giving profits back to employees are necessary first steps that more CEOs need to take. If business leaders want to protect American free enterprise, they need to stop attempting to game the system and instead give profits back to workers.
"I think if there was a sharing in the ups, a sharing in the downs, the country would not be as divided," Schnatter said.