Study: eight of the surveyed companies underperformed on S&P 500 but give high payouts
Back to my study. All of the CEOs of those eight companies had poor performance and high pay. Six different consulting companies worked with six of the companies and two of the companies weren’t advised by any pay consultant.
Five of those six firms are, in my view, the biggest names in the field.
Here they are, listed in descending order of the most egregious CEO overpayments:
- Hewitt Associates Inc.: Its client, W.R. Berkley Corp., an insurance holding company based in Greenwich, Connecticut, produced a total return in 2006 of 9.2 percent, a figure that was 6.6 percentage points below the 15.8 percent return on the S&P 500 Index. William Berkley, the company’s CEO, was paid $29.8 million in 2006, 3.8 times the competitive standard.
- Towers Perrin: Advised Boston Scientific Corp., a Natick, Mass.-based medical-device maker, which generated a total return in 2006 of negative 29.9 percent, 46 percentage points below the return on the S&P 500. The company’s CEO, James Tobin, received total pay of $23.4 million, 3.2 times the competitive standard. (The company also received some assistance of a lesser nature from consulting firm Watson Wyatt Worldwide Inc.)
* Mercer Human Resource Consulting: Mercer was the consultant to Advanced Micro Devices Inc., a chipmaker based in Sunnyvale, Calif. In 2006, that company’s total return was negative 33 percent, 47 percentage points below the return of the S&P 500. Its CEO, Hector Ruiz, received a pay package in 2006 worth $19.2 million, 2.9 times the competitive standard.
- Watson Wyatt Worldwide: Its client, USG Corp., the Chicago-based building materials manufacturer, generated a total return in 2006 of 8.9 percent, which was 6.9 percentage points below the S&P 500 return. The company’s CEO, William Foote, received a pay package in 2006 of $17.4 million, 2.2 times the competitive standard.
- Frederic W. Cook & Co.: Cook advised Aetna Inc., a Hartford, Conn.-based health care insurer. It had a total return in 2006 of negative 8.3 percent, which was 24 percentage points below the S&P 500 return. The company’s CEO, Ronald Williams, who got the job in February 2006, earned pay of $32.2 million, 2.1 times the competitive standard.
I don’t have much to add to this. I just think it is important to document who is who in this sort of abuse.