The mechanics of chief executive pay have grown ever more complex, but the rules remain simple: Strong performers get a raise.
But as The Wall Street Journal reports, so do most of the rest.
For the fourth year straight, the biggest U.S. companies set CEO pay records in 2018, even as a majority delivered negative stock-market returns to their shareholders—a sign of the often-weak relationship between pay and performance.
Median compensation rose to $12.4 million for the bosses of S&P 500 companies last year, up 6.6% from 2017 and the highest since the 2008 recession, an analysis by the newspaper found. Yet the median shareholder return for the companies was minus 5.8%, the worst showing since the financial crisis.
For 97 CEOs, last year’s pay was a high-water mark even while their shareholder returns were in the bottom half of the group. Among them: dialysis chain DaVita Inc., which doubled Kent Thiry’s pay to $32 million and recorded a negative 29% return, and Gap Inc., which paid Art Peck $20.8 million, the most of his four-year tenure, when it logged a negative 21% return.
The mismatches highlight lingering questions about how successfully corporate boards have tied executive pay to company performance. Urged on by investors and governance advocates, companies have spent years crafting mechanisms to do this. In many cases, new research suggests, the fault lies with the execution and complexity of the process. Read the full story.
