Report Navigation

Introduction Methodology Key Findings How Funds Vote Proxy Advisory Voting Recommendations A Look at Specific Votes Conclusion

Appendices

Overpaid Companies Overpaid Companies by Lowest Votes HIP Investor Regression Analysis Opposition at Mutual Fund Families Opposition at Pension & Other Funds Overpaid CEO Undeperformance Endnotes Acknowledgements & Disclaimer
 

SMOKE SIGNALS

Are Fund Managers Asleep At The Wheel?

 
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INTRODUCTION

For the past four years As You Sow has issued this report highlighting the 100 most overpaid CEOs among the 500 companies in the S&P500 index. The report’s prime focus is shareholder votes on these pay packages, particularly the votes of large financial managers, mutual funds, and pension funds.

CEO compensation as it is currently structured in the United States does not provoke positive economic outcomes like sustainable company growth. Instead it incentivizes focus on numeric goals that can be easily financially engineered. Many of the metrics that drive CEO pay are short-term and provoke decisions with negative long-term impact; underinvestment in research and development and choices that have long-term negative environmental impact. High CEO pay over-emphasizes the impact of a single individual at a company, rather than rewarding the work of the many company employees. It raises economic inequality to such a level that it becomes increasingly incompatible with a well-functioning economic system.

Manfred F. R. Kets de Vriescalls, of INSEAD -- a graduate business school with campuses in Europe, Asia and the Middle East -- wrote recently that inflated CEO pay is “a sign of impending rot.”

Overpaying the CEO of a company can lead many people to make the false assumption that such compensation is "earned" and justified. It is not. Indeed, the average corporation in its annual proxy statement devotes about ten thousand words to justify those large payments to their CEOs, often rationalizing those large payments by calling them "performance" based and market rate (citing as peers only overpaid CEOs).

Shareholder votes on CEO pay packages provide a critical and underutilized tool for restraining the worst excesses.

This report seeks to identify which financial managers are exercising their fiduciary responsibility and voting against these excessive payments. And conversely, which ones are simply rubber stamping their approval to ever-increasing CEO pay in company after company.