A Better Approach to CEO Pay Analysis
Below is the next installment in our series on pay versus performance data now available in corporate proxy statements. Calcbench has been working with Stephen O'Byrne, a renowned expert on executive compensation, to demonstrate how this information can help to assess whether CEOs are earning their keep and whether companies are aligning pay with performance. See his previous post for an introduction to the value of “PvP” disclosures. By Stephen F. O’Byrne Pay versus performance (PvP) disclosures give investors the ability to measure key pay dimensions for public companies and the executives leading those businesses. Investors can do this first by calculating relative cumulative pay and relative cumulative Total Shareholder Return (TSR); and then by calculating the regression trendline relating the natural log of relative pay to the natural log of relative TSR. Such a regression analysis provides insight into four “dimensions” of executive pay. The slope of the trendline provides...