The 100 Most Overpaid CEOs

Ted

FYI: According to the Economic Policy Institute,

“CEO pay grew an astounding 943% over the past 37 years, greatly outpacing the growth in the cost of living, the productivity of the economy, and the stock market, disproving the claim that the growth in CEO pay reflects the ‘performance’ of the company, the value of its stock, or the ability of the CEO to do anything but disproportionately raise the amount of his pay.”

For the past two years, we have highlighted the 100 most overpaid CEOs of S&P 500 companies, and the votes of large shareholders, including mutual funds and pension funds on their pay packages.
Regards,
Ted
https://corpgov.law.harvard.edu/2017/03/02/the-100-most-overpaid-ceos/

LewisBraham

This is the full report: asyousow.org/wp-content/uploads/report/The-100-Most-Overpaid-CEOs-2017.pdf

Once again at big firms DFA comes out on top as voting against these kinds of pay packages while BlackRock, Vanguard and Fidelity are at the bottom, rubber stamping egregious pay. How will they make the case voting for such packages is being a "good fiduciary" putting fund shareholders first? Meanwhile, smaller SRI fund shops--Trillium, Domini, Calvert and Pax--have good voting records here too. Parnassus has a surprisingly bad one.

In economics I've long known of the concept of marginal utility for consumers where if, say, you want a hamburger, the first one you eat has more use for you than say the second or third, each one having less value to the consumer than the last. I have to imagine that applies to CEO pay too. In fact I bet someone has done a study on this. At what point does giving someone another million or two cease really to motivate him/her, in fact could act as a disincentive as the executive is already making so much money they could retire at that instant and live comfortably without ever having to work again? I wonder if some hungrier younger executive looking to make their mark and willing to accept lower pay might actually do better than that highest-paid CEO. Or simply the executive of any age who cares so much for the company they don't need to have the fattest salary on earth.

Mark

"Or simply the executive of any age who cares so much for the company they don't need to have the fattest salary on earth." Buffett and Munger come to mind but my mind goes completely blank after that.

With respect to those voting records (DFA, Fidelity, Vanguard et.al.) I wonder how much nearly unfettered access to company CEO's goes into the decision making. If you vote against raising their pay do they become unwilling to meet and/or discuss with you? I'm just trying to figure out what influences those votes or do they just not care.

davidrmoran

Man, that is impressive about DFA.

And then Parnassus again, problematic.

LewisBraham

@Mark.

I'm just trying to figure out what influences those votes or do they just not care.

Let's say you're running one of the biggest fund shops on earth, and you have the opportunity to run General Electric's 401k plan and collect millions of dollars in management fees for running it. Are you going to vote against GE CEO Jeffrey Immelt's $33 million annual compensation plan? There is an inherent conflict of interest at the biggest fund shops regarding these votes. Their answer to questions about these conflicted interests is that they have a Chinese wall up on the votes and their 401k/retirement business doesn't get in the way of their decisions on CEO pay. But here's the thing, there's a simple way around that conflict of interest wall--vote in favor of all or almost all executive compensation plans no matter how egregious. That way they can say, "See no conflict of interest with this specific company we have 401k business with. We vote terribly on everything. "

LLJB

Sorry for a bit of a tangent but it would be interesting if you could, or someone has, tried to correlate high CEO pay or high C suite pay to stock performance. In some ways the CEO and his group of executives are like fund managers in that they have the final say on how your money is managed and their cost is like the management fee you pay.

It seems to me that part of the problem is that compensation committees are largely justifying salaries in a way that becomes a self-fulfilling prophecy. I think if you really want to start a war on CEO compensation or mutual fund expenses you have to go after the boards, but that won't work unless you can show it has an impact on performance or at least doesn't impact performance.

LewisBraham

@LLJB
There is an illustration of what you seek on page 11 of the report:
asyousow.org/wp-content/uploads/report/The-100-Most-Overpaid-CEOs-2017.pdf
The bar chart is called: "FIGURE 4 – MOST OVERPAID CEOS UNDER-DELIVER FOR SHAREHOLDRs"

MJG

Hi Guys,

In life "you don't always get what you pay for" seems to be a rule rather than an exception. That's especially true in the mutual fund business. Here is a Link to a one minute video that documents that truism from Morningstar:

http://www.morningstar.com/cover/videocenter.aspx?id=691300

Not surprisingly, the Dodge and Cox and the Vanguard organizations are impressive using this yardstick.

We've been losing the CEO pay fight for a number of years now. I don't see that changing much since most folks use their pay as a measure of their value to their companies in particular and to society in general. The rare exceptions are real treasures.

Best Wishes