Remember what I said yesterday? That these 19 leaders had their own agenda- and not necessarily the one we the stockholders and citizens of the US- want or need for our investments and for the strength of our national economy?

Well, Ric Marshall and Linda-Eling Lee of MSCI (a corporate governance research firm) just published a new study:  Are CEO’s Paid for Performance. They examined the performance of 428 large and midsized firms’ performance from 2006 through 2015- and compared that to the compensation provided the 800 or so CEOs that ran those firms during the same period.

In a nutshell, had someone invested $ 1K in the 20% of the firms with the highest paid CEOs in January 2006, they would have $2647.60 in 2015. But, had that same investor chosen to invest in the 20% of firms with the lowest paid CEO’s- their nest egg would be $ 3671.70.

Now, this is the total return- which means it includes the dividends that the corporations paid to their stockholders, not just the change in stock prices. Let that difference in returns sink in a while.

Yep. The higher paid CEO’s, the ones awarded all those bonuses for outstanding performance? Those firms provided no grand benefit to the stockholder- only to the executives. Tell me again you think stockholders really own the company in which they invest?

What should we do now that we have been armed with this real data about performance and reward?  Certainly that manifesto we discussed yesterday will not help stockholders obtain the benefits deserved.  Instead, we need to retire the canard (Don’t reach for your dictionary. Canard simply means BS.)- the one that claims providing stock options and/or restricted stock to CEO’s enhances corporate performance. Because it doesn’t. Well, that’s why it’s a canard.

Amazingly, some 70% of CEO pay involves compensation based upon this flim-flam; the problem is that flim-flam is being effected upon the corporate investors. The CEOs collect regardless of the company’s performance.

This data simply amplifies the periodic reports I’ve posted over the years demonstrating corporate performance and executive pay are, at best, distant cousins. (This and this are but two examples.)

I bet you can hardly wait until Monday- when I drop the other shoe about corporation executives.

Share this: