March 22, 2016
Study: Controlled Companies Underperform, CEO Pay Much Higher
– Broc Romanek, CompensationStandards.com
This study – “Controlled Companies in the Standard & Poor’s 1500: A Follow-up Review of Performance & Risk” – was commissioned by the IRRCi and performed by ISS. It finds that controlled companies generally underperformed non-controlled firms over all periods reviewed in terms of total shareholder returns, revenue growth, and return on equity, according to a new study. The study also finds that average CEO pay is significantly higher at controlled companies with multi-class stock structures: three times higher than that at single-class stock controlled firms and more than 40 percent higher than average CEO pay at non-controlled firms. In addition, director tenure typically runs longer, board refreshment is generally slower, and boardrooms are less diverse at controlled companies.