May 7, 2020
As You Sow “CEO Comp Report”
– Lynn Jokela
Earlier this year, shareholder proponent As You Sow issued its sixth annual “100 Most Overpaid CEOs” report, it’s available for download from their website – here’s an excerpt about the methodology used to identify the companies listed in the report:
Each year we evaluate CEO pay at all S&P 500 companies using data provided by ISS. We also use data provided by HIP Investor that uses a statistical regression model to compute what the pay of the CEO would be, assuming such pay is related to cumulative TSR over the previous five years. This provides a formula to calculate the amount of excess pay a CEO receives. To this we add data that ranks companies by what percent of company shares were voted against the CEO pay package. Finally, we rank companies by the pay ratio between CEO’s pay, and the pay of the median company employee.
One of the “findings” mentioned in the report is that there were 30 asset managers that increased their votes “against” executive compensation programs by more than 10% from 2018 to 2019. Of course votes on executive compensation can be driven by more than pay-for-performance concerns, a year-to-year adjustment to comp voting policies can also impact actual voting decisions.
Among other findings, the report says when company performance is considered, the most overpaid CEOs are disproportionately overpaid and that the list of the 100 Most Overpaid CEOs contains many repeat offenders. It might be more interesting to see the report a year from now after a turbulent economic year.