Jul

26

Ray Irani Top Paid CEOToday's WSJ summarizes the decade's top 25 earners among CEOs. While there are many variables which affect CEO compensation, investors should note the troubling absence of any obvious relationship between long-term stock performance and CEO pay. For students of free enterprise and tax policy, there are many questions raised by these findings. Other studies involving the entire S&P 500 universe have shown similar conclusions.

Thought experiment: would the stock returns have been any different if the CEO compensation dropped a "0"? (i.e. $400 million -> 40 million)


comp million$

stk return

leh

457
1.1

nvr
451
1.6

dell
454
34

cdnt
481
51

csco
393
71

iac
1143
78

ctywide
529
81

capone
568
86

tgt
342
101

clp
358
137

nbr
518
141

c
361
143

fst
385
148

qcom
437
192

utx
448
253

yhoo
490
279

oracle
1836
317

sbux
358
333

ftx
332
479

fnf
430
548

unh
469
707

oxy
857
974

aapl
749
1171

chk
332
1179

xto
351
3559

Jim Lackey writes:

There are big list of tells we can use:

1. Dollar a year man. Quickly moves to slash burn and sell the company to no benefit of current holders. Look to the last job/ company he held and where the old management team is. That's where the assets are going.

2. X company man. GE six sigma. Look for them to run the company into the ground with focus on cost cuts firing the bottom 10% "creating shareholder value". Meanwhile their competitors are hiring all those fired with a contact or client book and quickly signing deals. Making money vs reducing costs.

There are many others and to "get the joke" one must watch "Charlie Wilson's War".


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1 Comment so far

  1. Boabdil on July 27, 2010 4:40 pm

    An excellent article on executive compensation and the agency problem can be found here http://tinyurl.com/3xbbrs2

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