DEFINITION of 'Fat Cat'

The term fat cat is a slang description of 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'

The term fat cat 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 by an average of 3.1% each year.

How a Fat Cat Leverages Influence

Fat cats are 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 fat cats have a proven understanding of how to generate wealth on a substantial scale – and that 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. Fat cats 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 and for the influence they can exert with other potential donors and 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 in which the fat cat has a sizeable stake. The use of such influence might raise questions of ethics and legality, depending on the actions a fat cat takes. For example, if a fat cat were to use his or her sway to compel suppliers not to do business with a rival in order to force them out of business, such actions could draw the attention of regulators.

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