CEO Pay Increases Slightly Outpace Results

While the media has been feasting on the controversial debate over whether or not executive compensation has been soaring in recent years, a new study by DolmatConnell & Partners reveals that CEO pay increases at companies listed on the Dow Jones Industrial Average only slightly outpace financial performance increases.  

The study, Debunking the Myth of Runaway CEO Pay, finds that increases in CEO pay at companies included in the Dow index loosely mirror their financial performance. For the study, DolmattConnell looked at CEO base salaries, short- and long-term incentives, and total compensation levels ofrom 1997 to 2006.

During that time, CEO pay has grown at an annual compounded rate of about 15.1 percent (an increase from $7.81 million in 1997 to $19.90 million in 2006), while compounded total shareholder return has grown at about 12.1 percent.

“Overall, the study illustrates that the large increases in CEO 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 Jack Dolmat-Connell, president of DolmattConnell & Partners, in a statement. “CEO pay is not out of control. CEO Pay rises and falls with company performance, and American companies in general have performed well in recent years.”