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CEO pay for performance information April 8, 2007

Posted by Jordi in CEOs, corporate governance.

NY Times has a great visual interactive that shows the relationship between CEO pay and stock performance.

My quick observations:

– There is lots of vertical dispersion.   Other factors explain CEO pay than stock performance.  Its more intense close to y-axis (little change in company stock.

– There are few egregious sector 1 entries (High CEO pay, falling stock value).

– There is a  general trend towards higher pay for more performance.  Whether that relationship tranlsates into improved performance for the company absent the contributions of that CEO is harder to argue.  A lot harder.



1. silviamocanu07 - April 10, 2007

I also don’t believe that stock performance is the key influencing factor of CEO performance.
In many instances, the bonus received by the CEO is based upon whether the company has achieved its proposed goals at the end of the year, such a a certain increase in profits or reduction of production costs for instance.
This is the type of reward structure that my father’s organization actually uses in evaluating its CEO throughout its many subsidiaries.

2. Jordi - April 10, 2007

So, if the CEO makes certain goals, lowering production costs, that are NOT reflected in stock price, should they be rewarded still? Should stock valuation and internal goals perfectly align?

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