Introducing Pay-vs.-Performance Data

Everyone knows that corporate CEOs make lots of money. Now, however, you can have a more precise understanding of exactly how much money CEOs are making and whether the CEO is truly delivering good performance for his or her firm — because Calcbench has started tracking companies’ pay-for-performance data. 

Disclosures about CEO compensation are reported in the proxy statement. Typically that data is difficult to find, extract, and study, but the crack software development team here at Calcbench has developed a few techniques to find and present those disclosures in the crisp, easy-to-navigate interface that subscribers know and love. 

Let’s start with an example from Walmart ($WMT) so you can see what we mean. 

First, use the Disclosures and Footnotes Query tool to search Walmart’s disclosures. Look for the “Related Documents” menu on the left side of the screen, open that menu, and you’ll see an option for “Pay Versus Performance” at the bottom. Click on that choice, and you’ll see something like Figure 1, below. We’ve added a red arrow to show you where the pay-versus-performance option is.

That’s how you find the data; it’s just those two steps of pulling up the footnote disclosures of the company you want to research and selecting the pay-versus-performance choice. The much bigger questions are how to understand this data (because there’s a lot!) and how you might put it to productive use.

What Is This Data Anyway?

The Securities and Exchange Commission adopted rules requiring these enhanced compensation disclosures in 2022. Companies must now report more details on compensation of the “principal executive officer” (the “PEO,” who is typically the chief executive officer at the company), plus an average of compensation paid to the other named executive officers.

In our Figure 1 above, the PEO is Walmart chief executive Douglas McMillion. The other “NEOs” are the rest of Walmart’s senior management team, such as CFO John Rainey and Kathryn McLay, head of Walmart International.

You can also see two separate columns for “Summary Compensation” and “Actual Compensation Paid,” for both the PEO and the other NEOs. What’s the difference? Summary compensation paid is more of a mathematical exercise, calculating the value of equity awards and other perks provided to the executive in question; actual compensation paid is usually a different number (sometimes a very different number) because it includes certain adjustments made for pension benefits and equity awards when the executive actually claims those items. 

Most interesting to us, however, is the performance data reflected in the Total Shareholder Return columns. 

Those TSR numbers are based on the hypothetical return a shareholder would receive if he or she had invested $100 at the start of the pay-versus-performance period we’re looking at (including cumulative dividends, all re-invested). Essentially, TSR numbers let the investor see whether the company’s returns are appreciating as quickly as executives’ compensation.

For example, Figure 1 covers fiscal years 2021 through 2025 for Walmart. The TSR calculations start from the beginning of fiscal 2021. So at the end of that first year, the $100 you invested was worth $124.77; by the end of fiscal 2024, it was worth $153.75. Then TSR surged in this most recent fiscal year, to $277.55.

Meanwhile, we can also see that Walmart’s TSR underperformed its peers for the first few years of the five-year lookback, but overperformed in this most recent year. You can also see that McMillion’s compensation actually paid followed a roughly similar arc (look at that huge bump he received this year), and you can quickly eyeball gains in revenue and net income for the five fiscal years too.

How Can Calcbench Help?

If you’re an investor analyst trying to understand how much money is going to executive compensation or whether those executives are earning their keep, pay-versus-performance disclosures are a great resource. 

Calcbench has all that data neatly tracked and presented, and as usual you can export the data in table format into Excel.

Overall, proxy statements offer tons of data about executive compensation and performance. Calcbench indexes and collates it all, so we’ll have more posts in coming days and weeks about how subscribers can harness all this information and ways you might put it to good use in your analysis.