Are the CEOs of your stock holdings worth their paycheques? Here are ways to tell
Last updated Thursday, Jan. 05, 2017 12:11PM EST
The Canadian Centre for Policy Alternatives said this week that average compensation for chief executive officers at the top 100 companies listed on the TSX clocked in at $9.5-million for 2015. To add salt to the wound, it pointed out that by noon on the first working day of the year, the typical CEO will have earned the average full-year Canadian industrial wage of $49,510.
As usual, the total is skewed by outliers. In 2015, for instance, the former CEO of Valeant Pharmaceuticals International Inc., saw a total compensation of $183-million. You may recall that the Valeant stock price is down about 90 per cent since the beginning of 2015, which gives new meaning to the concept of pay for performance. If we exclude this outlier and divide by the remaining 99 participants, we have an adjusted CEO pay of $7.75-million – still not exactly loose change.
The report's author points out that there are outliers every year, but in the previous two years the range was less extreme – $88 to $90-million for the CEOs of Blackberry and Onex Corporation respectively. Adjusting for these top paycheques, we find that the trend is actually down from $8.40-million in 2013 to $8.14-million in 2014 to the current austerity of $7.75-million.
This discussion of executive compensation is timely: Investors will shortly begin to receive annual reports for the year just ended along with a management information circular which outlines the compensation for the top executives. You may even be invited to vote on a “Say on Pay” motion, though the result will be considered advisory and the board may choose to ignore the result.
So as an investor, how can you find out whether you are getting value for money? ...