The best-paid CEOs tend to run some of the worst-performing companies and vice versa—even when pay and performance are measured over the course of many years, according to a new study.
The analysis, from corporate-governance research firm MSCI, examined the pay of some 800 CEOs at 429 large and midsize U.S. companies during the decade ending in 2014, and also looked at the total shareholder return of the companies during the same period.
MSCI found that $100 invested in the 20% of companies with the highest-paid CEOs would have grown to $265 over 10 years. The same amount invested in the companies with the lowest-paid CEOs would have grown to $367.
“The highest paid had the worst performance by a significant margin,” said Ric Marshall, a senior corporate governance researcher at MSCI. “It just argues for the equity portion of CEO pay to be more conservative.”
One possible factor driving the results, the researchers concluded: Annual pay reviews and proxy disclosures, which discourage boards and executives from focusing on longer-term results.
Here in Kenya a similar proposal had been enacted by CMA, we are yet to look through some of the 2016 financials, but this disclosures in Kenya just don’t exist but we clearly need them.
