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Is the Boss Really Worth Their Pay? The Good and the Bad of CEO Salaries

By: Kapitall
Posted: 11/27/2012 5:56:00 PM
Referenced Stocks: ANF;APOL;GE;JCP;LUK;MRO;MSI;PHMD;PRU;SD

Consumers and investors alike are starting to question just how responsible companies are when it comes to the environment, social or governance (ESG) issues. In line with this, sustainably-minded investors are questioning the sometimes over-inflated compensation packages that many CEOs are receiving.

Executive Compensation

When thinking about ESG (environmental, social and governance) issues, internal corporate behavior can sometimes take center stage. One part of corporate governance behavior is executive compensation. It is clear that CEO pay has been increasing at an alarming rate when compared to the average worker.  Is it warranted though?  In some cases, perhaps, but as you can see in this post, there are numerous examples of CEOs making millions when their shareholders are losing big.

According to a recent study put out by the Economic Policy Institute, chief executives at America's 350 biggest companies were paid 231 times as much as the average private-sector worker in 2011. Unbelievably in 1978, CEOs took home only 26.5 times more than the average worker.

Granted, compensation for a job well done can be warranted, but many shareholders have lost value in their stock position while their CEOs pull in millions.  Some companies that have paid their CEOs lavishly while their stock price has plummeted include:

    CompanyLast CloseDaily Change5-Year ReturnCEO Compensation
 Abercrombie & Fitch Co (ANF)$43.71-$0.12-0.3%-41.5%$48,069,473
 Apollo Group Inc (APOL)$18.68+$0.05+0.3%-73.7%$25,135,275
 General Electric Co (GE)$20.68+$0.06+0.3%-44.4%$21,581,228
 iStar Financial Inc (SFI)$7.74+$0.15+2.0%-70.9%$25,910,306
 J C Penney Company Inc (JCP)$17.25+$0.01+0.1%-57.0%$53,281,505
 Leucadia National Corp (LUK)$21.02+$0.05+0.2%-51.4%$28,145,138
 Marathon Oil Corp (MRO)$31.50$0.000.0%-44.0%$31,529,419
 Motorola Solutions Inc (MSI)$53.87+$0.010.0%-49.8%$29,329,052
 PhotoMedex Inc (PHMD)$12.98+$0.07+0.5%-61.4%$28,284,287
 Prudential Financial Inc (PRU)$51.13+$0.35+0.7%-44.5%$23,693,441
 SandRidge Energy Inc (SD)$5.62-$0.10-1.7%-81.7%$25,261,502

 

CEO comp

Click here and press "play" on Kapitall's Compar-O-Matic to see how CEO compensation for the stocks listed above has changed in the past two years.

On the other end of the spectrum the following companies have some of the lowest compensated CEOs and have brought healthy 5-year returns to their investors:

CompanyLast CloseDaily Change5-Year ReturnCEO Compensation
Airgas Inc (ARG)$89.50-$0.10-0.1%+91.6%$2,092,489 
Amazon.Com Inc (AMZN)$238.03+$4.25+1.8%+198.4%$1,681,840 
AmerisourceBergen Corp (ABC)$40.85+$0.05+0.1%+87.7%$4,609,882 
Autozone Inc (AZO)$381.87+$0.74+0.2%+262.3%$4,741,481 
D.R. Horton, Inc. (DHI)$19.45+$0.01+0.1%+77.5%$4,003,807 
Family Dollar Stores Inc (FDO)$68.83-$0.06-0.1%+210.0%$4,747,395 
Fastenal Co (FAST)$40.77-$0.14-0.3%+113.4%$3,258,911 
Fossil Inc (FOSL)$83.55+$0.64+0.8%+104.7%$0.00 
Intuitive Surgical Inc (ISRG)$534.46-$2.02-0.4%+91.0%$4,548,559 
O'Reilly Automotive Inc (ORLY)$91.55+$0.18+0.2%+195.3%$3,696,252 
Public Storage (PSA)$144.29-$0.24-0.2%+93.1%$2,759,800 
PulteGroup Inc (PHM)$16.83+$0.08+0.5%+81.9%$4,865,747 

Click here and press "play" on Kapitall's Compar-O-Matic to see how CEO compensation for the stocks listed above has changed in the past two years.

Ceo comp

'Tis the Season: CEOs in Retail

In light of this shopping season, below we can see which clothing retailers are returning shareholder value along with keeping CEO compensation to a minimum (Gap, Foot Locker) and also the companies who are poor performers when it comes to shareholder return and excessive CEO pay (JC Penney and Abercrombie and Fitch).

Using Kapitall Compar-O-Matic tool, here is a comparison of the CEO compensation against one-year returns on stock price in the retail sector.

ceo comp

Written by Dale Wannen, Kapitall’s ESG content expert.