Is that much pay really justified? The explainer omits to mention that the Bitcoin mining industry is inarguably exploding. At US-listed firms, executive compensation has exploded to an average $14.4 million. That means that it’s a mind-boggling 118% increase in just one year, which begs some very difficult questions. Do these payouts really need to go out to attract and retain the best and brightest? Or do they simply foreshadow a more insidious problem festering just below the surface?

Are Miners Overpaying Executives?

Let's be blunt: that $14.4 million figure dwarfs what you see in many established sectors. We’re speaking orders of magnitude above averages in industrial energy and advanced tech. Why? The easy answer is "risk." Both bitcoin mining and CMS are volatile, capital-intensive, and rife with regulatory uncertainty. You need the best people, right?

Here's where the unexpected connection comes in: remember the dot-com boom? Sky-high valuations, promises of disruptive innovation and… huge, huge executive compensation packages. How did that end? Not well for many. Are we seeing another example of this phenomenon in action? The allure of “disruptive innovation” appears to legitimize all kinds of wasteful expenditures and payoffs, regardless of how the real world performance compares.

Stock-Based Compensation: Red Flag?

In 2024, an eye-popping 89% of miner executive compensation is tied to stock-based pay. This exclusive dependence on Performance Stock Units (PSUs) is especially troubling. PSUs are an improvement, as they tie executive performance to creating shareholder value. The theory is that the executives will be forced to make smart decisions that drive up the share price, enriching them and us.

What do you do when the market is already so frothy. Especially when any whiff of positive news causes Bitcoin to skyrocket, no matter what it means for the company’s bottom line. Are executives being compensated for genuine success, or were they just cashing in on crypto hype?

Riot's executives received $230 million, equivalent to 73% of the company's 2024 market-cap gains. Marathon's wasn't much better at 18%. That's not a pay-for-performance alignment; that's a highway robbery.

Perhaps TeraWulf and Core Scientific are better examples of an efficient alignment, but those outliers do not excuse the widespread trend. It is the mother of all heads I win tails you lose scenarios. When their stock price increases, their executives become wealthy. If it goes down, the company still pockets a nice sum of money. In the end, it’s investors who are left holding the bag.

This is where the anger comes in. We’re not against tolling per se—the money isn’t the issue, it’s the principle here. It's about fairness. It’s not just the material impact, it’s the sense that the system is rigged for the people at the top. And that kind of awe and wonder can be one of the most important motivators.

Shareholder Revolt Brewing?

Specifically, it should be no surprise that shareholders are beginning to revolt. Yet the Bitcoin mining sector on average receives only 64% support for executive pay proposals. This is a sharp contrast from corporate America writ large where approval ratings are near-universal. This is not a petty complaint, it’s an insurrection.

What happens when investors lose faith? What are the implications when they begin to dump those shares because they no longer feel like they aren’t being screwed over in deals. The house of cards starts to wobble.

The fear of being deemed unsustainable plays a role here as well. Bitcoin mining is energy-intensive. It faces increasing competition and regulatory scrutiny. If corporations are wasting hundreds of billions on executive compensation, how much are they wasting on innovation, efficiency and long-term sustainability?

Here's a thought-provoking question: if a company is prioritizing lavish executive compensation over sustainable practices, is it truly committed to the future of Bitcoin, or is it just trying to cash in while the getting's good?

The truth, quite honestly, will dictate if this industry continues to prosper or sputters out like so many other short-lived tech bubbles. It’s high time for less opacity, less crony capitalism and a lot less shameless grifting. Investors deserve better, and the long-term health of the Bitcoin mining sector relies on it.

The future of Bitcoin mining isn’t simply a tech story, it’s a narrative of responsible leaders prioritizing a commitment to fairness. Let's demand both.

  • Demand Transparency: Contact your brokers, write to the companies directly. Ask for detailed breakdowns of executive compensation and how it aligns with performance metrics.
  • Vote with Your Wallet: If you're invested in a company with excessive executive pay, consider selling your shares and investing in companies with more responsible governance.
  • Support Activist Investors: Look for activist investors who are challenging excessive executive pay and advocating for shareholder rights.

The future of Bitcoin mining isn't just about technology; it's about responsible leadership and a commitment to fairness. Let's demand both.