Pay has little to do with performance of executives
Title: IHT: Shareholders gain little from chiefs' raises
Source: International Herald Tribune
Date: April 5, 2004
From the article:
- The escalating excess that passes for everyday pay at corporations in America has long been justified this way: If executives are not paid outsized amounts, they will flee to greener pastures. Shareholders will lose. But a new and comprehensive academic study shows, once and for all, that increases in executive pay do not, on average, translate into subsequent gains for shareholders. Not in the next year, not in three years, not in five.
- The study found that a 1 percent increase in total compensation for each of the top five executives at companies predicted a 0.22 percent decrease in average shareholder return over the next year and a 0.12 percent decline over three years. The effect over five years was statistically insignificant.