CEO pay more accountable

Companies that pay out bonuses to their CEOs enjoy a significantly higher company performance: study
By
|Canadian HR Reporter|Last Updated: 12/22/2005

Pay-for-performance at the executive level is taking hold, with companies making strong links between company performance and CEO total cash compensation, according to a Watson Wyatt study released last month.

The study looked at CEO pay for more than 200 companies listed in the Standard & Poor’s/Toronto Stock Exchange Composite Index.

Those companies that paid out bonuses to their CEOs enjoyed a significantly higher company performance: 15.6-per-cent three-year annualized total return to shareholders (TRS) (compared to 10.4 per cent for those with no bonuses) and 16-per-cent one-year TRS (compared to minus-8.5 per cent). Those with above-median increases in total cash compensation saw 19.4-per-cent TRS, compared to 8.6 per cent TRS for the below-median group.