A new report from As You Sow has found that companies with the most overpaid CEOs have had lower returns to shareholders than the average S&P 500 company.
In the tenth edition of its “100 Most Overpaid CEOs” report, As You Sow highlighted that between February 2015 to September 2023, companies within the Top 100 delivered average annual returns of 7.9%, compared to an average of 8.5% for the S&P 500 as a whole.
Companies in the Top 25 delivered average returns of 6%, while the Top 10 delivered returns of 6.5%.
The shareholder advocacy group noted that the total pay for the most “overpaid” CEOs continues to grow moving to reference its first report issued 10 years ago when the average pay for the Top 10 was $56 million. This has risen to $88 million in 2023.
“Besides lagging returns for investors, companies also missed an opportunity to strengthen employee pay, allocate funds to new innovations, or pay dividends to shareholders – all due to the effects of overpaid CEOs, which include distortion of corporate priorities and unfulfilled promises for expected higher performance,” commented R. Paul Herman, CEO and founder of HIP (Human Impact + Profit) Investor Inc.
“Boards, CEOs, and shareholders need to pay closer attention to avoid underperformance from overpaid CEOs, and rather pay more appropriate amounts for real results.”