It is obvious that the actual performance is getting worse as the CEO gains a huge payment

ByBrandon Watts

Generally, in the United States it is not uncommon that the top of a huge company gets huge executive compensation, and the income disparity from the average employee is hundreds of times higher. Although it is a huge remuneration that has been regarded as "a return to raising many profits", as the research team of the University of Utah advanced detailed research, in reality there are many rewards that the CEO of the company obtains It is becoming obvious that the performance as a company is getting lower as much as the company.

(PDF file) Performance for Pay? The Relation Between CEO Incentive Compensation and Future Stock Price Performance by Michael J. Cooper, Huseyin Gulen, P. Raghavendra Rau :: SSRN

The Highest-Paid CEO Are The Worst Performers, New Study Says - Forbes

The huge remuneration paid to the CEO is often provided in the form of stocks and stock options, a typical example of which isOracleCEO of the company and get the highest reward in the worldThe NY Times reportedLarry Ellison said that in 2013 it received stock worth equivalent of $ 77 million (about 7.8 billion yen).

ByOracle PR

University of Utah ·David Eccles Business SchoolMichael Cooper et al. And colleagues investigate the actual conditions of 1,500 top companies in various industries and conduct research with higher accuracy than before. In the period from 1994 to 2013, when verifying the correlation between CEO's compensation amount and corporate performance with 3 years as one break, the tendency that the larger the scale of remuneration, the worse the performance of enterprises It was embossed. In the past, there was a general idea that "CEOs with the most money in the industry involved make the most appropriate judgment", and this is the basis for paying a large amount of remuneration to the CEO and Although it was becoming, the report shows a trend opposite to this in the report.

In addition, the fact that the CEO's highest remuneration has a tendency to decline in the top 150 companies has been revealed, which has not been known so far. Although there is no specific name, there is an exception, but as a whole it is clear that the company that CEO's compensation is in the top ten, the result that the actual performance was bad Compared with companies other than companies, shareholder profit has been found to be about 10% lower. Furthermore, as the company included in the top 5%, the actual result shows a clear deterioration trend, and the reality of the shock is clarified in a sense that it shows a performance as much as 15% lower than other average values I will.

Regarding the reality that the higher the top compensation is, the reality that the company's performance is bad, the report states that the reason is "conceited, overconfident" by the word. The CEO who gains huge reward tends to shut down information contrary to his idea and tends to think that he is "right", he points out that it lacks accuracy when making business decisions. The phenomenon that is caused as a result is "overinvestment", and it is becoming clear that there is a tendency to make excessive investment in the business with no profitable cause. In the report, the average profit margin when a person belonging to 150 low-ranking CEOs who has a lower payout amount of 13% executes a company acquisition is-0.51%On the other hand, the average profit margin in the case of the persons belonging to the higher rank is further deteriorated-1.38%It is clarified that it is "It is revealed that the higher the compensation is, the lower the profit falls to one-third and the shareholder value worsens".

In addition, in the report, the tendency of corporate performance to decline as CEO's enrollment period becomes longer is also disclosed. With regard to this trend, the survey team said that if the tenure period becomes longer, surrounding people tend to be consolidated with "yes man", and it is also revealed that the 22% profit is lower than the average other companies It is.

ByOlivier Carré-Delisle

In the report, it is avoided to make a statement about measures to take on the above trends, but among experts, "If we do not realize a high profit, we will contract a provision that cuts compensation as CEO It is touched on the fact that a measure called "to include in" is shown. At the same time, however, it is also clarified that this strategy is not functioning well, and there is also a voice pointed out that "there is an abnormal disparity in remuneration in the upper part and general employees in the US" I will.

In the United States, companies are asked to clarify the disparity ratio of average employee and top reward in 2010 in 2010Dodd-Frank · Wall Street Reform · Consumer Protection ActAlthough it is established,Securities and Exchange CommissionHas not yet made a final decision on the actual operation method, and the movement toward the implementation is weak even at the enterprise level. Under such circumstances, Bloomberg has an average wage disparity as of 2013204 to 1It is clear that the disparity has expanded by 20% compared to 2009, and it is clear that general electricJeffrey ImmeltAn example is shown that the compensation earned by the CEO is $ 28.2 million (about 2.9 billion yen), which is 491 times as wide as the average 6 million yen employee.

In the United States, the occupied movement, which occupies Wall Street (Okyupai) and gives protests, spreads at peak in 2012 and shows a movement to oppose the current situation of inequality , It seems that the contents clarified this time seems to have become such that such a voice has to be further accelerated.


in Note, Posted by darkhorse_log