While the media has been feasting on the controversialdebate over whether or not executive compensation has been soaring in recentyears, a new study by DolmatConnell & Partners reveals that CEO payincreases at companies listed on the Dow Jones Industrial Average only slightly outpace financialperformance increases.
The study, Debunking the Myth of Runaway CEO Pay, finds thatincreases in CEO pay at companies included in the Dow index loosely mirror their financial performance. Forthe study, DolmattConnell looked at CEO base salaries, short- and long-termincentives, and total compensation levels ofrom 1997 to 2006.
During that time, CEO pay has grown at an annual compoundedrate of about 15.1 percent (an increase from $7.81 million in 1997 to $19.90 millionin 2006), while compounded total shareholder return has grown at about 12.1percent.
“Overall, the study illustrates that the large increases inCEO pay over the past 10 years have been driven by large increases in the size,profitability, and shareholder return of the companies that CEOs run,” said JackDolmat-Connell, president of DolmattConnell & Partners, in astatement. “CEO pay is not out of control. CEO Pay rises and falls with companyperformance, and American companies in general have performed well in recent years.”