LinkedIn Facebook Twitter Email Contact Card
Compensation in Context Newsletter
VERITAS EXECUTIVE COMPENSATION CONSULTANTS
San Francisco
    Chicago
    New York
    Washington D.C
415-618-6060
www.veritasecc.com

Highest-Paid CEOs Actually Run Some of the Worst-Performing Companies

A new study sheds fresh light on the correlation between CEO pay and total shareholder return.

August 1, 2016

Critics of exorbitant CEO pay got some new ammo Monday. New analysis found that some of the highest-paid CEOs oversee some of the worst-performing companies when pay and performance are tracked over several years.
Corporate-governance research firm MSCI summarizes its new study this way: “Has CEO pay reflected long-term stock performance? In a word, ‘no.’”
Equity incentive awards now comprise 70% or more of total summary CEO pay in the United States, according to MSCI, which examined 800 CEOs at 429 large and midsize companies in the United States from 2006 to 2015. If that pay was actually effective in incentivizing superior future performance, one would expect a strong correlation between higher pay figures and total shareholder return. MSCI’s analysis suggests the opposite:
"We found little evidence to show a link between the large proportion of pay that such awards represent and long-term company stock performance. In fact, even after adjusting for company size and sector, companies with lower total summary CEO pay levels more consistently displayed higher long-term investment returns."
One-hundred dollars invested in the 20% of corporations with the top-paid CEOs would have grown to $265 over the study’s 10-year window. Meanwhile, $100 invested in the companies overseen by the lowest-paid CEOs would have increased to $367.
MSCI blames this misalignment, in part, on the Securities and Exchange Commission’s disclosure rules that focus on annual reporting instead of long-term results. It suggests that a CEO’s cumulative pay and performance data over his or her entire tenure should also be taken into account to reduce reliance on figures that only consider the short-term.
Veritas Executive Compensation Consultants, ("Veritas") is a truly independent executive compensation consulting firm.

We are independently owned, and have no entangling relationships that may create potential conflict of interest scenarios, or may attract the unwanted scrutiny of regulators, shareholders, the media, or create public outcry. Veritas goes above and beyond to provide unbiased executive compensation counsel. Since we are independently owned, we do our job with utmost objectivity - without any entangling business relationships.

Following stringent best practice guidelines, Veritas works directly with boards and compensation committees, while maintaining outstanding levels of appropriate communication with senior management. Veritas promises no compromises in presenting the innovative solutions at your command in the complicated arena of executive compensation.

We deliver the advice that you need to hear, with unprecedented levels of responsive client service and attention.

Visit us online at www.veritasecc.com, or contact our CEO Frank Glassner personally via phone at (415) 618-6060, or via email at fglassner@veritasecc.com. He'll gladly answer any questions you might have.

For your convenience, please click here for Mr. Glassner's contact data, and click here for his bio.
VERITAS EXECUTIVE COMPENSATION CONSULTANTS
powered by emma
Subscribe to our email list.