CEO compensation cannot be correlated with total stock market returns, according to a study of 65 companies listed on the Toronto Stock Exchange that was released today by the C$96.1 billion (US$87.4 billion) Ontario Teachers' Pension Plan, Toronto.
"The results of this study raise serious questions about the alignment between CEO compensation and the market performance of their companies," Brian Gibson, OTPP senior vice president-public equities, said in a statement about the study.
The study — produced by the OTPP and the Rotman School of Management of the University of Toronto — found no "statistically significant correlation exists between the excess total return of a company and the relative pay of its CEO" for 2001 through 2003. Excess total return was used as a measure of a company's performance relative to its industry group.
The study also found on average, companies with the greatest increase in CEO pay provide only median levels of excess total returns.
"On behalf of the many active and retired teachers who are shareholders in Canadian companies, we are encouraging boards to re-examine their executive compensation structures to find ways to improve the link between pay and performance," Mr. Gibson said in the statement.