By Graef Crystal
(posted Friday, Nov. 21)
In recent years, company after company has taken the pay-for-performance pledge. This time, they promise shareholders, the future will be different, no longer will the CEO make tons of money in good times and bad. Oh really? How come, then, when I recently analyzed the compensation of 856 CEOs of mostly middle- and large-sized companies, I found that roughly 98 percent of the variation seemed to have little or nothing to do with how they performed? The pay for these CEOs ranged from a minuscule $51,000 for Robert Levine of Cabletron Systems to a mammoth $189 million for Michael Eisner of Walt Disney. About 25 percent of the variation in their pay could be explained by differences in company size. But only 2 percent could be explained on the basis of differences in shareholder-return performance (stock-price appreciation plus reinvested dividends).
Illustrations by Michael Sloan.