More pension fund officials and asset managers are holding companies accountable for excessive compensation but could be doing more, according to "The 100 Most Overpaid CEOs" report issued Tuesday by advocacy group As You Sow.
"There's an increasing awareness that these CEO pay votes really do matter," said Rosanna Landis Weaver, program manager of executive compensation at As You Sow, in a statement. "Very smart people at a variety of funds are really digging deeply into this issue and revamping their proxy voting guidelines. After six years of our report, we see this trend has continued. Private conversations, known as engagements, are insufficient to deal with the systemic problems."
The report compared CEO pay with company performance and found that 15 of the most overpaid CEOs had compensation at least $20 million higher and as much as $200 million more than if their pay had been properly aligned with performance. The list of overpaid CEOs has several repeaters, including Walt Disney, American International Group, Ameriprise Financial, Centene, Jefferies Financial Group and Netflix.
As You Sow evaluated pay packages for which votes were cast before June 30, 2019.
The report found that 15 U.S. and Canadian public pension funds voted against pay packages for CEOs on the 100 Overpaid list, while many asset managers continue to improve their analysis and vote against more CEO pay packages, but the report criticizes some of the largest fund managers, including BlackRock, for not voting. "Since many pension funds use BlackRock as one of their financial managers, they may not be fully aware of what BlackRock is doing (and not doing) on their behalf," the report said.
The report also cites an analysis by Equilar on how shareholder votes against CEO pay packages can lead to significant reforms. Equilar found that after failed pay votes in 2018, common changes were increasing the proportion of long-term incentive plan grants strictly tied to performance, reducing overall pay, and changing metrics or weighting among other changes.