Monday, July 1, 2013

The Unstoppable Rise In CEO Pay

CEO compensation in 2012 averaged $15 million.  That was a 16% increase over 2011.  Stock options comprised $9 million of gross compensation.  The median stock holdings of CEO's is equal to $51 million.

The focus of CEO compensation packages is on short-term performance.  Only a handful of firms include measures of product innovation.  Stock options are also granted in the first two months of the year.  CEO's get more shares if the stock prices fall after the first two months.  They may be being rewarded for the destruction of shareholder value.

This report provided lots of details on CEO compensation and made several recommendations for change.  However, it expressed little hope for a positive change in CEO compensation.  Corporate boards, which determine CEO compensation are hand picked by the CEO, and most of them are CEO's at other firms.  They are a part of the brotherhood.  Most Wall Street investors are also more concerned about short term performance than they are about the longevity of the firms in which they invest.  They can make money by selling shares short when they anticipate a decline a in firm's stock price.

This graph provides an interactive guide that lists the 2012 compensation  of top CEO's.

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