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Highly paid CEOs are actually pretty rubbish at their jobs, study finds

Alphr logo Alphr 28-07-2016 Vaughn Highfield

Are you a highly paid company CEO? Turns out you’re limiting your company’s potential. At least, that’s what new research carried out by MSCI has found, The Independent reports.

The study found that every $100 (£76) invested in companies with the highest-paid CEOs would have grown to $265 (£202) over ten years. Not bad, but if that same money was put into companies with the lowest-paid CEOs, it would have grown to a rather tidy $367 (£279) over the same period.

Obviously, there are a lot of factors to consider here, including business sector, growth models and ultimately how CEOs decide to be paid. MSCI’s paper asks whether CEOs are paid for performance and, after having looked at the salaries of 800 CEOs at 429 large- and medium-sized US companies between 2005 and 2014, it would appear not.

The report notes that: “Equity incentive awards now comprise 70% or more of total summary CEO pay in the United States, based on our calculations. Yet we found little evidence to show a link between the large proportion of pay that such awards represent and long-term company stock performance.

“In fact, even after adjusting for company size and sector, companies with lower total summary CEO pay levels more consistently displayed higher long-term investment returns.”

Without wanting to name names, you can probably look at the tech Fortune 500 to find the most successful companies and work out which ones probably pay their CEO the most – excluding Apple, obviously.

Blackberry’s CEO was paid a whopping CA$89.7m ($67.9m / £51.8m) in 2014 – 184 times the average Canadian worker’s income. Conversely, Sony Corp’s CEO Kazuo Hirai was “only” paid 513 million yen ($4.9m / £3.7m) – some 311 million yen more than the year before due to him turning Sony’s fortunes around.

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