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CEO Pay, Stock Price II (And worker pay too!) April 11, 2007

Posted by Jordi in Business-Society Issues, CEOs.
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Here is another view of CEO pay and Stock performance. Worker pay is also thrown in for good measure.

This is drawn from multiple sources. United FOr a Fair Economy compiled it from:

Total executive compensation: 2005 data based on Wall Street Journal survey, April 10, 2006; all other years based on similar sample in Business Week annual compensation surveys (now discontinued). Includes: salary, bonus, restricted stock, payouts on other long-term incentives, and the value of options exercised.
S&P 500 Index: Economic Report of the President, 2006 Table B-96; 1997, 2000 Table B-93; average of daily closing prices.
Corporate Profits: U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, Table 6.16, with inventory valuation and capital consumption adjustments.
Average worker pay: Based on U.S. Department of Labor, Bureau of Labor Statistics, Employment, Hours, and Earnings from the Current Employment Statistics Survey (average hourly earnings of production workers x average weekly hours of production workers x 52).
Minimum wage: Lowest mandated federal minimum wage, nominal; U.S. Dept. of Labor, Employment Standards Administration, Wage and Hour Division.
Adjustment for inflation: BLS, Average Annual CPI-U, all urban consumers, all items.

One conclusion is that CEO pay is far more sensitive to stock prices than profitability. Average worker pay is insensitive ot these factors. It doesn’t budge.

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.