About 15% of S&P 500 companies have highly paid CEOs, even though their shareholder performance is “significantly out of line with peers,” according to a study by Proxy Governance and commissioned by the IRRC Institute for Corporate Responsibility.
An analysis of new disclosures filed with the SEC identified the “companies with high pay relative to peers which is not justified by correspondingly superior performance,” the study said.
The study does not name the companies.
“Executive compensation is ultimately a corporate expense: Higher compensation expense, relative to an appropriate peer group, should yield higher relative returns,” according to the study, “Compensation Peer Groups at Companies with High Pay.”
Unfortunately, there is not “a broadly accepted model, such as the Capital Asset Pricing Model, to define an efficient frontier for executive compensation,” the study said.
Michael Ryan, Proxy Governance president and COO, said in a statement about the study: “The new compensation disclosure requirements by the U.S. Securities and Exchange Commission have, for the first time ever, made it possible to evaluate structures and processes used by boards of directors to develop compensation packages. This analysis offers a new framework for better understanding what's behind high CEO compensation.”