Are CEOs Paid for Performance?

categories: ESG Products & Services, Americas, EMEAI, Investing (Investment Management), Performance Analysis, Responsible Investing, Asia Pacific, Asset Owners, Equities, Research Paper, Asset Managers (Quant or Fundamental), MARSHALL Ric

2016 IRRC Institute Investor Research Award Honorable Mention

Has CEO pay reflected long-term stock performance? In a word, “no.” Companies that awarded their Chief Executive Officers higher pay incentive levels had below-median returns, based on a sample of 429 large-cap U.S. companies observed from 2005 to 2015. On a 10-year cumulative basis, total shareholder returns of those companies whose total summary pay was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%. For long-term institutional investors, this potential misalignment of interests between CEOs and shareholders could undermine the adoption of equity-based incentive pay that has dominated executive pay practices in the U.S. for the past three decades.


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