CEOS Up $1.26 Billion, Shareholders Down $330 Billion
The Corporate Library’s latest study – Pay for Failure II: The Compensation Committees Responsible – highlights twelve of the largest companies in the U.S. that combined high levels of CEO compensation and poor performance over the past five years.
PORTLAND, MAINE, May 7, 2007 — The Corporate Library’s latest study of executive incentive compensation practices finds in its five-year analysis that twelve large U.S. companies display the most pronounced gap between pay and performance. Within this group, the boards’ compensation committees authorized a total of $1.26 billion in pay to CEOs who presided over an aggregate loss of $330 billion in shareholder value.
Each of the twelve companies earned a High Risk rating from The Corporate Library; paid their CEOs in excess of $15 million in the last two available fiscal years; brought a negative return to shareholders over the last five years; and underperformed their peers over the same period. "While there are a few companies in this year’s Pay for Failure report that also featured in the first report published in 2006, there are seven new companies, many of them suffering from the same compensation faults," said the report’s author, Senior Research Associate Paul Hodgson.
This year’s Pay for Failure companies are:
• Affiliated Computer Services, Inc.
• Dell Inc.
• Eli Lilly and Company
• Ford Motor Company
• Home Depot, Inc. (The)
• Pfizer Inc.
• Time Warner Inc.
• Verizon Communications Inc.
• Wal-Mart Stores, Inc.
• Abbott Laboratories
• Qwest Communications International Inc.
The complete study examines in detail the incentive policies at each of the twelve companies, finding high proportions of fixed pay, poorly-chosen performance metrics, and rewards for below-median performance. The report also looks at the makeup of the compensation committees at the companies, listing the members by name, along with their compensation.
The full report is available from The Corporate Library’s online store at www.thecorporatelibrary.com.
About The Corporate Library
The Corporate Library is an independent research firm that provides corporate governance information products, research services and data to a broad variety of clients, including institutional investors, corporations, D&O liability insurers, law firms, accounting firms, executive search firms, and academic institutions. The Corporate Library produces the definitive ratings of U.S. corporate boards of directors, allowing businesses that subscribe to the service to evaluate governance as an element of investment and other risk. The Corporate Library is also a leading publisher of corporate governance reports and studies, including reports on CEO employment contracts, governance practices, mutual fund proxy voting, and executive and director compensation, which its analysts compile using its extensive database of over 3,000 public companies and over 45,000 directors. Additional information on The Corporate Library and its suite of online corporate governance data and analysis products can be found on its website at www.thecorporatelibrary.com.
Media Manager, The Corporate Library
Posted: May 2007