These Are The 100 Most Overpaid CEOs

Tyler Durden's picture

Via Rosanna Landis Weaver of AsYouSow.org,

According to the Economic Policy Institute,

“CEO pay grew an astounding 943% over the past 37 years, greatly outpacing the growth in the cost of living, the productivity of the economy, and the stock market, disproving the claim that the growth in CEO pay reflects the ‘performance’ of the company, the value of its stock, or the ability of the CEO to do anything but disproportionately raise the amount of his pay.”

For the past two years, we have highlighted the 100 most overpaid CEOs of S&P 500 companies, and the votes of large shareholders, including mutual funds and pension funds on their pay packages.

What has changed since the first report? Not much. Executive pay has continued to increase. Although mutual funds and pension funds are doing better at exercising their fiduciary responsibility by more frequently voting their proxies against some of the most outrageous CEO pay packages. Of the mutual funds with the largest changes in voting habits from last year, all of them opposed more of the pay packages than they had the prior year.

As we noted in our prior reports, the system in place to govern corporations has failed in the area of executive compensation. Like all the best governance systems, corporate governance relies on a balance of power. That system envisions directors representing shareholders and guarding the company’s assets from waste. It also envisions shareholders holding companies and executives accountable.

This governance system comes from a time when it was assumed that unhappy investors would simply sell their stakes if sufficiently dissatisfied with the governance of a company. It reflects a time when there were fewer intermediaries between beneficial holders and corporate executives. However, today more and more investors own shares through mutual funds, often investing in S&P 500 index funds. Individual investors are not in a position to sell their stakes in a specific company. The funds themselves are subject to a number of conflicts of interest and to what economists refer to with the oxymoronic-sounding term “rational apathy,” to reflect the expense of oversight in comparison to a pro rata share of any benefits.

Today, those casting the votes on the behalf of shareholders frequently do not represent the shareholders’ interests.

CEO compensation as it is currently structured does not work; rather than incentivize sustainable company growth, compensation plans increase disproportionately by every measure. Too often CEOs are rewarded for mergers and acquisitions instead of improving company performance. As noted in the Financial Crisis Inquiry Report, “Those [compensation] systems encouraged the big bet—where the payoff on the upside could be huge and the downside [for the individual executive] limited. This was the case up and down the line—from the corporate boardroom to the mortgage broker on the street.”2 We note that the downside, which could include such features as environmental costs, may be limited for the individual, and instead borne by the larger society.

Paying one individual excessive amounts of money can lead people to make the false assumption that such compensation is justified and earned. It undermines essential premises of capitalism: the robust ‘invisible hand’ of the market as well as the confidence of those who entrust capital to third parties. Confusing disclosure coupled with inappropriate comparisons are then used to justify similar packages elsewhere. These systems perpetuate and exaggerate the destabilizing effects of income inequality, and may contribute to the stagnating pay of frontline employees.

As the report is now in its third year, we have the ability to look back and see what happened to the companies identified in our report two years ago. We’ve been saying the most overpaid CEOs under-deliver for shareholders. In examining this data from the following two years of our report, we have found dramatic results—not only does the group of 100 most overpaid CEO companies of the S&P 500 underperform the S&P 500 by 2.9 percentage points, but the firms with the 10 most overpaid CEOs underperformed the S&P 500 index by an amazing 10.5 percentage points and actually had a negative return, reducing the actual value of the companies’ shares by 5.7 percent. In summary, the firms with the most overpaid CEO’s devastated shareholder value since our first report published in February 2015.

Identifying the 100 most overpaid CEOs in the S&P 500 was our purpose in writing this report (available here). In undertaking this project we focused not just on absolute dollars, but also on the practices we believe to have contributed to bloated compensation packages.

Shareholders now supposedly have the right, since the enactment of the Dodd-Frank financial reform act, to cast an advisory vote on compensation packages. However, in today’s world, most shareholders have their shares held and voted by a financial intermediary. This means that this critical responsibility is in the hands of a fiduciary at a mutual fund, an ETF, a pension fund, a financial manager, or people whose full time job is to analyze the activities of the companies they invest in and monitor the performance of their boards, their CEOs, and their compensation.

A key element of the report has been to analyze how mutual funds and pension funds voted on these pay packages. This year we vastly expanded the list of funds we looked at. In response to excessive and problematic CEO pay packages, it should be noted that every fund manager has the power to vote against these compensation plans and withhold votes for the members of the board’s compensation committee who created and approved them. In some cases, institutional investors should request meetings with members of the compensation committees to express their concerns. Institutional investors should be prepared to explain their votes on executive pay to their customers, and individuals should hold their mutual funds accountable for such decisions by expressing their displeasure directly to those that are also well compensated to protect and represent them.

Finally, again this year we looked at the directors who serve on the compensation committees of these boards.

Key Findings

Of the top 25 most overpaid CEOs, 15 made the list for the second year in a row, and 10 have been on the list for the third time. These rankings are based on a statistical analysis of company financial performance with a regression to identify predicted pay, as well as an innovative index developed by As You Sow that considers more than 30 additional factors.

The companies we listed in first report on overpaid CEOs has markedly underperformed the S&P 500 since that time. The 10 companies we identified as the most overpaid firms as a group underperformed the S&P 500 index by a gaping 10.5% and actually demolished shareholder value as a group with –5.7% financial returns. In summary, the most overpaid CEO firms destroyed shareholder value since our first report.

Many of the overpaid CEOs are insulated from shareholder votes, suggesting that shareholder scrutiny can be an important deterrent to outrageous pay packages. A number of the most overpaid CEOs are at companies with unequal voting structures and/or triennial votes, so shareholders did not have the opportunity to vote this year on the extraordinary packages. While the Say-on-Pay law allows less frequent votes, and shareholders can decide if they prefer to vote every one, two, or three years, the vast majority of companies hold annual votes on pay. We believe that the fact that our list of the top 25 overpaid CEOs includes several companies that do not hold annual votes on pay implies that such insulated companies are more willing to flaunt best practices on pay and performance.

The most overpaid CEOs represent an extraordinary misallocation of assets. Regression analysis showed 14 companies whose CEOs received compensation at least $20 million more 2015 than they would have garnered if their pay had been aligned with performance.

Shareholder votes on pay are wide-ranging and inconsistent, with pension funds engaging in more quantitative analysis. This report, representing the broadest survey of institutional voting ever done on the topic, shows that pension funds are more likely to vote against overpaid packages than mutual funds. Using various state disclosure laws, we were able to collect data from over 30 pension funds. The data shows some pension funds approving just 18% of these overpaid CEO pay packages, to others approving as many as 93% of them.

Mutual funds, on the other hand, are far more likely approve of these overpaid CEO pay packages even though among mutual funds there is wide variation. Of the mutual funds with the largest changes in voting habits from last year, all of them opposed more of the pay packages than they had the prior year. In addition to the trending votes, several funds have indicated that, at a minimum, they will be reviewing pay more closely. Of the largest mutual funds, Dimensional Fund Advisors opposed 53% of these packages, while Blackrock opposed only 7% of them. Some funds seem to routinely rubber stamp management pay practices, enabling the worst offenders and failing in their fiduciary duty. TIAA-CREF, the leading retirement provider for teachers and college professors, is more likely to approve high-pay packages than almost any other institution of its size with support level of 90%.

Directors, who should be acting as stewards of shareholder interests, should be held individually accountable for overseeing egregious pay practices. A number of directors serve on two or more overpaid S&P 500 compensation committees. We list the companies that over-paying directors serve on, and identify individuals who serve on two or more ‘overpaid’ S&P 500 compensation committees.

A primary goal of the report is to focus on mutual fund voting data. This data is disclosed on an annual basis according to a proxy season that covers shareholder meetings held from July 1 of the previous year to June 30 of the present year.

The complete publication is available here.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
J S Bach's picture

Is there a list of underpaid CEOs?

Chris Dakota's picture
Chris Dakota (not verified) J S Bach Mar 6, 2017 9:41 PM

Corporations suck, I try not to use them if I can.

SilverRoofer's picture

Donald J Trump

Pres USA

$1 dollar

 

canisdirus's picture

I'd love to see this, too, because it means they're producing outsized results.

TAALR Swift's picture

Is there a list of underpaid CEOs?

Yes, they are located offshore, in Asia. They could do the same job, but for far less, if you give them an H1B visa. There is a certain beauty in its symmetry and poetic justice. 

If you want to save even more, use an AI and some entrepreneurs. 

prime american's picture
prime american (not verified) TAALR Swift Mar 7, 2017 7:29 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

Andre's picture

Greed.

 

 

 

 

:)

Yen Cross's picture

  I say we throw them all in a "Space Shuttle", and make Carl Icahn the commander.

BorisTheBlade's picture

Those CEOs are the first and most obvious sources of optimization in the case of hostile takeover. That said, many if not most of them would have golden parachute provisions in their contracts.

Kefeer's picture

One way ticket aimed at the sun with all the nuclear waste stockpile along with it.

Joe_in_Indiana's picture

Only 100?? Surely there are more!!

 

401K of Dooom's picture

The list in this article is a list of people who voted for Obama and believe in open border.  I would love to see these people deal with a modern bar-code scanner at a supermarket checkout ( just like with Bush 41)!

wobblie's picture

Pretty much all of the S&P is way over paid, as well as most bankers and other "investors" and financial scum, sports figures and entertainment trash.

 

Montgomery Burns's picture

Hmmmm..... Theres some common factor regarding a lot of those names. I'll have to think about it and get back to you.

JustPrintMoreDuh's picture

Well at least illiterate sports figures aren't also raping society.  Or blood sucking bankers. POS lawyers.  You get the idea.   

45North1's picture

From the top of the L curve is a grand place to rake the capital of the nation to under ones feet.

TeethVillage88s's picture

It just looks odd to me. Behavior Medicine based in King of Prussia, Pennsylvania.

Universal Health Services - Wikipedia

https://en.wikipedia.org/wiki/Universal_Health_Services

Universal Health Services, Inc. (NYSE: UHS) ("UHS") is a Fortune 500 company based in King of Prussia, Pennsylvania. It is one of the largest hospital ...

Bigly's picture

Lookee at all those deep state media and ilk companies

timehill's picture

If I'm an advertiser on CBS, I just might re-evaluate my budgets as a rather large portion is going to Leslie Mooves' total compensation.

In the 1960-75 era, the CEO compensation was 53 times the average floor worker.  Do you really believe the average CBS worker is making well over $1,000,000 annually?????

CEO compensation has completely gone out of control!

Decimus Lunius Luvenalis's picture

If there is a better real example of the continued dollar debasement, please let me know.... 

Proctologist's picture

CEO

Certified
Egotistical
Oaf

Apt desc 95% of time, can usually be determined within a few minutes of starting a conversation.

fannyplucker's picture

CEO's are in the lineage of "Neutron" Jack & "Chainsaw" Al. It is easy to layoff and outsource than invest for productivity improvements. Boards are corrupt. Who gave the option to Marissa Mayers pick to forego salary and not the stock options for Yahoo hacking? 

GRDguy's picture

They ARE overpaid for the simple reason that they're plantation managers.

They're lightning rods for the REAL owners who profit greatly,

especially from the labor of their not-so-well-paid employees and suppliers.

What a mess_man's picture

Yep and with most/all large corporations, from the CEO down through the next 3 or so levels of highly paid executives its largely cronyism. Then the compensation drops like a rock.  Crumbs for the peasants.

Jack.Lincoln's picture

I wonder why the main-stream media execs are getting paid so well?

dojufitz's picture

Story of a guy here in Melbourne Australia a couple of years ago..... applied for a CEO position.... got it.... was getting use to the office for a couple a days until someone decided to see how he ran the last company on his CV..... it was all BS! Guy was nothing but a middle manager..... he literally ran out of the building! Lol!

backwaterdogs's picture

Where's Caterpillar ceo?  should be on the list

unnamed enemy's picture

ah the job creators making too much money, what else is new??

unnamed enemy's picture

ah the job creators making too much money, what else is new??

adr's picture

I still can't figure out what Salesforce.com actually does. Other than massive publicly traded companies use Salesforce.com because their CEO says they have to. 

The reason why CEO pay is so high, is that they all exist in the if you pat mine I'll pat yours world. 

How many of these CEOs sit on other corporations boards and get paid for it?

I doubt anyone on that list could actually run a real private business where you actually have to know something and sell a real product to make enough profit to pay yourself. 

Marissa Meyer might be the dumbest millionaire CEO of all time. I seriously don't think she can have a critical thought. If she didn't have a pussy, she'd probably be hanging out at intersections begging for change. 

FlKeysFisherman's picture

I agree with Salesforce, that reeks of a shakedown operation.

roddy6667's picture

Salesforce is another Amazon or Tesla that doesn't make any money, but people pay big money to own it. Another tulip. Wikipedia quote:

As of early 2016, it is one of the most highly valued American cloud computing companies with a market capitalization above $55 billion,[5] although the company has never turned a GAAP profit in any fiscal year since its inception in 1999.[6][7]

roddy6667's picture

Here in China there seems to be a balance. The middle class is 54% and growing. The poor have come the farthest. There isn't the class envy that comes with seeing somebody else getting rich while you get poorer every day. That is the formula for social unrest. Everybody knows they are better off than 10 or 20 years ago.

It is easier to start a company and get rich here than in America. With 190 billionaires and more than two million millionaires, China tags just behind the US in number of high-net-worth individuals, according to research from Forbes magazine and Boston Consulting Group.

salman's picture

...what place Yellen has in this list???...

deerhunter's picture

But are they making over 7K a month working part time? That is key. Probably never home .

Stud Duck's picture

On that list is Rex Tillerson, Exon ceo, but he will not have to pay taxes since his appointment to Sec of State. That is the benifit of being appointed to a office, he has to divest of his assest but does not have to pay any taxes. I wish some of the confirming people would bring that up during confermation but not by the people that benifit also.

Another on the list is Cheseapeak, still getting paid and they are bankrupt!! I guess it does pay to run the old CEO's vehice by remote into a Railroad bridge, especially when he is one the way to give a deposition and spill the "rest of the story"!