Highest-Paid CEOs Run Worst-Performing Companies

The multi-million pound pay packages handed out to CEO’s don’t actually improve the companies they work for, in fact it makes them worse.

A newly published study by corporate-governance research firm MSCI has highlighted this issue. They ask the simple question: “Has CEO pay reflected long-term stock performance? In a word, ‘no.’”

Many people have complained about huge salary boosts to heads of companies, now these increases don’t actually improve business performance; there will be questions raised why these packages are offered.

This information will add fuel to the fire of excessive pay, in light of the BHS revelations and the accusations of mis-management by Sir Philip Green, and the £1.2 billion he has paid himself.

The MSCI analysis discovered that some of the highest-paid CEOs run some of the worst-performing companies when pay and performance are traced over several years.

The study tracked 800 CEOs who steer over four hundred companies from 2006 – 2015. They report that if higher pay packages actually worked then their should be a correlation between inflated pay and increase in shareholder return. However, this isn’t the case, the report states:

“[W]e 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.”

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