10 Years of Study Shows Overpaid CEOs Underperform
Live Nation Entertainment, Oracle, and Alphabet earn most overpaid spots
FOR IMMEDIATE RELEASE
MEDIA CONTACT: Sophia Wilson, [email protected], (341) 600-1832
BERKELEY, CALIFORNIA—NOV. 15, 2023—As You Sow today released its 10th “100 Most Overpaid CEOs” list linking excessive CEO Pay to corporate performance.
This 10th list incorporates new compensation data and builds on the 9th report released in February 2023. In a year marked by labor strikes that use vast pay disparities to measure how workers are undervalued, investors and companies alike can use this tool to hold executives to higher standards of individual and corporate performance moving forward.
Key findings:
Companies with the most overpaid CEOs have had lower returns to shareholders than the average S&P 500 company. The typical S&P 500 firm made 8.5% per year annualized from February 2015 to September 2023, the 100 Most Overpaid CEOs’ annual returns lagged at 7.9%, the worst 25 dragged at 6.0%, and the ten worst were behind at 6.5% per year. As a group, over a decade, overpaid CEOs underperformed.
Total pay for the most overpaid CEOs continues to grow. When As You Sow compiled its first overpaid CEO list ten years ago, the average pay of the 10 Most Overpaid was $56 million. This year, the average of the top ten was $88 million, an increase over that time period of 59%.
The 100 Most Overpaid CEOs list contains many repeat offenders and underperformers. Five companies on the list of those most frequent appearances had negative five-year total stock return (TSR): Discovery Communications, now part of Warner Brothers Discovery (10 of 10 times on the list); Fidelity National Information Systems (8 of 10 times on the list); and Walt Disney (9 of 10 times on the list).
Quotes from our experts:
Rosanna Landis Weaver, executive compensation program manager at As You Sow and lead researcher:
“The pay increase of the most overpaid CEOs is both infuriating and disheartening. It was also unnecessary for recruiting, retention, or competition. There are over 250 companies – half of the S&P 500 companies – that didn’t appear on these overpaid CEO lists in any of the past ten years. That undermines the ‘everyone is doing it, so we have to’ justification that boards often give when presenting outrageous pay packages. Last year, there were nearly 300 S&P 500 companies whose CEO’s total disclosed compensation was under $15 million.”
R. Paul Herman, CEO and founder of HIP (Human Impact + Profit) Investor Inc.:
“Besides lagging returns for investors, companies also missed an opportunity to strengthen employee pay, allocate funds to new innovations, or pay dividends to shareholders – all due to the effects of overpaid CEOs, which include distortion of corporate priorities and unfulfilled promises for expected higher performance. Boards, CEOs, and shareholders need to pay closer attention to avoid underperformance from overpaid CEOs, and rather pay more appropriate amounts for real results."
Robert Reich, professor, author, former Secretary of Labor, and co-founder of Inequality Media:
“The extraordinary increase in CEO pay is contributing to widening inequalities of income and wealth in America. Shareholders can and should take action on this. European pension funds have the right idea. U.S. pension funds need to step up.”
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As You Sow is the nation’s leading shareholder representative, with a 30-year track record promoting environmental and social corporate responsibility and advancing values-aligned investing. Its issue areas include climate change, ocean plastics, pesticides, racial justice, workplace diversity, and executive compensation. Click here for As You Sow’s shareholder resolution tracker.