CEOs:1 Shareholders:0 (Yet again)

The Corporate Library, an independent agent serving its clients with risk assessment, business development and research and analysis on issues such as corporate governance and executive compensation, has just published a (second actually) study of executive incentive compensation which reveals that twelve large U.S. companies display the most pronounced gap between pay and performance. There are huge yet not surprising names on the list, as I'm sure you are not only familiar with their presence in the business world but also with their image on issues such as corporate governance and CEO compensation.

The thing here is that, this is not one of those useless ethics, corporate governance rankings. This is a study where incentive (Where compensations are also nothing but incentives nowadays) policies at each of the twelve companies were examined by finding high proportions of fixed pay, poorly-chosen performance metrics, and rewards for below-median performance. Each of the twelve companies earned a High Risk rating from The Corporate Library; paid their CEOs in excess of $15 million in the last two available fiscal years; brought a negative return to shareholders over the last five years; and underperformed their peers over the same period. "While there are a few companies in this year's Pay for Failure report that also featured in the first report published in 2006, there are seven new companies, many of them suffering from the same compensation faults," said the report's author, Senior Research Associate Paul Hodgson, in an interview to Market Wire. The list, by the way, goes like this:

Affiliated Computer Services, Inc.
Verizon Communications Inc.
Dell Inc.
Wal-Mart Stores, Inc.
Eli Lilly and Company
Abbott Laboratories
Ford Motor Company
Qwest Communications International Inc.
Home Depot, Inc. (The)
Wyeth
Pfizer Inc.
Time Warner Inc.

The crucial outcome of this study show us that, within this group of twelve, the boards’ compensation committees authorized a total of $1.26 billion in pay to CEOs who presided over an aggregate loss of $330 billion in shareholder value. The executive guys at these giants did not only paid "themselves" billions of dollars for nothing, but they also "managed" a loss of $330 billion in their shareholder values. The most interesting part of the study is the essence that it looks at how the compensation committees at those companies are made, listing the members by name, along with their compensation. That is a clear evidence on this issue actually...

So I have to ask. Where is the ethical decision making which brings forward the common thought to maximize the long-term owner value by doing your business? Where is the corporate governance conception which puts the interests and rights of the shareholders in the first place among its key principles? Ignored completely, and thus CEOs won once more...

Relevant Links:
The Corporate Library