DEFINITION of 'Fat Cat'

Fat cat is a slang word used to describe executives who earn what many believe to be unreasonably high salaries and bonuses. These top executives also receive generous pensions and retirement packages, consisting of extra compensation not available to other company employees.

BREAKING DOWN 'Fat Cat'

This term conjures up the image of cats that consume more than an appropriate amount of food and become grossly overweight.

Publicly-traded companies are required to disclose the amount of compensation that their top five executives receive. As a result, companies have been under a lot of scrutiny for excessive executive compensation, especially in the face of floundering revenues.

A real-life example of a fat cat would be former Disney CEO, Michael Eisner. For a period of five years in the late 1990s, Eisner received over $737 million in compensation, despite the fact that the company's five-year net income shrank an average of 3.1% each year.

How a Fat Cat Leverages Influence

A fat cat is often regarded as having vast amounts of capital at their personal disposal. In addition to any executive position or board memberships the individual may hold, a fat cat may also possess considerable influence in social, community, political, and business communities.

The assumption is that a fat cat has a proven understanding of how to generate wealth on a substantial scale and their input is believed to generate lucrative results.

For instance, a fat cat may have earned a sizeable payout from a lucrative venture, such as the sale of a company they helped found or grow, earlier in their career. Along with the cash from the deal, the individual may have developed clout and a considerable reputation among their peers. The influence and leverage a fat cat might exert can stem from tangible activities, such as becoming an investor in early-stage companies and startups. They might establish organizations, funds, or other platforms that allow them to actively leverage their wealth to support some endeavor. Political campaigns might seek the support of fat cats for their access to capital for funding as well as the influence they can exert with other potential donors and even voters.

A fat cat might also broker business deals and arrangements through the connections they have developed. This influence could potentially be used to sway activity in a market or industry that the fat cat has a sizeable stake in. The use of such influence might rise questions of ethics and legality, depending on the actions a fat cat takes. For example, if a fat cat were to use their sway to compel suppliers to not do business with a rival in order to force them out of business, their actions may draw the attention of regulators.  

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