NEW YORK — According to research on executive compensation released recently by The Conference Board, not only have the CEOs of Gamco Investors, CBS Corp, Viacom, Regeneron Pharmaceuticals, Walt Disney, Yahoo! and Discovery Communications featured on the list of the 25 highest paid executives in America every year since 2012, but their pay has almost always been driven by factors other than the price of their company shares.
A collaboration between The Conference Board, Arthur J. Gallagher & Co. and MylogIQ, CEO and Executive Compensation Practices: 2016 Edition documents trends and developments in senior management compensation at companies that issue equity securities registered with the U.S. Securities and Exchange Commission (SEC) and were included in the Russell 3000 index as of May 2016.
“In the last few years, companies have been responding to public scrutiny over pay-for-performance and made significant adjustments to their compensation policies—curbing base salaries and annual bonuses, introducing retention requirements on equity awards, and shifting from single metric to blended-metric incentive plans,” saidMatteo Tonello, Managing Director of Corporate Leadership research at The Conference Board and co-author of the report. “And yet we found that pay and performance alignment, at least where performance is measured in terms of total shareholder return (TSR), continues to elude some industries’ chief executives.” Their top-level compensation is due to performance metrics other than TSR. For example, at asset management public company GAMCO, Mario Gabelli receives fees related to the total assets that his investment company manages, not only the returns generated by those invested assets. At media companies Viacom and CBS, the performance targets of choice are operating income and free cash flow, both for annual and long-term incentives; moreover, the compensation required to retain a CEO is inevitably distorted by the generous compensation offered by those companies to the artists and other media talent needed to appeal to wide audiences. Therefore, at least for these individuals, an analysis of TSR performance is only going to tell some of the story.
“One of the pleasures of working with and writing about the data in this survey is the time perspective. I can think of no other survey that does not just look at the last two years of figures,” said Paul Hodgson, partner of governance research firm BHJ Partners and co-author of the study. “Having five years of data allows you to really understand the trends in executive pay over time, which is so much more enlightening than a simple ‘what happened last year’ approach. Things change so fast in executive pay that making claims based on a single year change often opens you up to having to make a counter all the following years.”
“This report is a comprehensive review of all companies in the Russell 3000 over the past five years and is a remarkable resource for those interested in executive compensation,” added James Reda, Managing Director, Executive Compensation Consulting at Arthur J. Gallagher & Co., also a co-author. “The pay trends are stratified by industry and company size and provide insight into what is really happening with senior executive compensation in the U.S.”