CEO Compensation And Firm Performance: Is There Any Relationship?

Abstract

Recent media and public attention has focused on CEO compensation. This study looks at the relationship between CEO compensation and several measures of firm performance across a wide variety of industries. The study used a database of CEO compensation for 200 large public companies which filed proxy statements with the SEC for 2007. Total CEO compensation consists of: base salary, cash bonuses, perks, stock awards, and option awards. The measures of firm performance were: company revenue, year-to-year change in net income, and year-to-year change in total shareholder return (TSR). Correlation and regression analysis were used to test various hypotheses. We expected that total CEO compensation and its components would be directly related to financial measures of company performance.