Report Navigation

• Introduction • Methodology • Key Findings • Proxy Advisor Voting Recommendations • Votes of Managers of Mutual Funds and ETFs • Socially Responsible Investing Funds • Votes by Pension Funds • Pay Ratio Disclosure • Conclusion

Appendices

• The 100 Most Overpaid CEOs • S&P 500 Companies with Most Shareholder Votes Against CEO Pay • HIP Investor Regression Analysis • Financial Fund Managers' Opposition to CEO Pay • Pension Fund Opposition to CEO Pay • Most Overpaid CEOs Under-Perform Financially • Endnotes • Acknowledgements & Disclaimer
 

THE 100 MOST OVERPAID CEOS 2019

Are Fund Managers Asleep At The Wheel?

 
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INTRODUCTION

In 2015, As You Sow embarked on a mission to identify and report on the most overpaid CEOs of the S&P 500 and whether or not pension funds and financial managers held companies accountable for such excessive compensation. At the time, we found that far too many funds and managers were rubber stamps for these excesses.

This 2019 study is the fifth report of our research results. During these five years, what has changed? Quite a bit, and not enough. Significantly, more large shareholders are voting against more CEO pay packages. Those who are not are more isolated and defensive.

Companies have responded to this shareholder opposition. A February 2019 Equilar analysis, Companies Shift CEO Pay Mix Following Multiple Say on Pay Failures, found that “The average CEO total compensation at companies that failed Say on Pay (shareholder votes) decreased significantly from 2011 to 2017, a total of 44.9% over that time frame.”1

Yet overall CEO pay continues to increase. According to Institutional Shareholder Services (ISS) the average pay for a CEO in the S&P 500 grew from $11.5 million in 2013 to $13.6 million in 2017. An analysis by the Economic Policy Institute, which includes the cashing in of stock options, found that “in 2017 the average CEO of the 350 largest firms in the U.S. received $18.9 million in compensation, a 17.6 percent increase over 2016.”2

The Tax Cuts and Jobs Act, which became effective in 2018, has been called a giveaway to corporations, which used their huge tax savings to buy back their own stock instead of creating more jobs or raising worker pay ($4,000 a year was promised), as supporters claimed would happen. However, the law produced a positive change with respect to executive compensation. It eliminated the loophole for executive “performance-based pay” in section 162m of the tax code that was used to get around the $1 million cap on the amount of executive compensation that corporations could deduct from their taxes. Many experts believe this “performance pay” loophole from 1990s tax legislation was a factor in the spiraling increase of CEO pay that followed.

Thanks to the 2010 Dodd-Frank financial reform bill, shareholders gained access to new information this year. Companies must now disclose the ratio of pay between the CEO and the company’s median employee, shining a brighter light on how high CEO pay has become. This new information can also be used in other ways. As discussed in the pay ratio section of this report, the city of Portland, Oregon was the first to introduce a corporation tax rate based on this ratio.

This change happened amidst growing acceptance that there are financial reasons to be concerned about economic inequality. In October 2018, the UN Principles for Responsible Investment (UN PRI) published a critical report, “Why and how investors can respond to income inequality.” In the foreword, UN PRI CEO Fiona Reynolds writes: “Institutional investors have increasingly begun to realize that inequality has the potential to negatively impact institutional investors’ portfolios, increase financial and social system level instability; lower output and slow economic growth; and contribute to the rise of nationalistic populism and tendencies toward isolationism and protectionism.”3

As Bloomberg columnist Nir Kaissar noted in a recent editorial, “As the grim pay disclosures pile up year after year, the backlash against the corporate elite will intensify. If corporate boards can’t find a better balance in their pay structure, outside forces will, and at a potentially far greater cost to companies and their shareholders.” Bloomberg’s Alicia Ritcey and Jenn Zhao compiled the CEO-to-worker compensation ratios for companies in the Russell 1000 Index and found that “the median employee compensation for 104 of the companies is below the federal poverty level of $25,750 for a family of four. That’s the number below which workers are eligible for government assistance.”4

Opposition to high CEO pay has risen, and more companies have seen their CEO pay packages receive less and less support from their shareholders. European funds and U.S. public pension funds have made their opposition to a broken system clear. In this year’s report we pay special attention to those funds with the greatest change in voting practices on the issue of CEO pay as well as highlight some of the reasons that have led to more shareholder votes against those pay packages.

 

Methodology

HIP Investor regression we’ve used every year that computes excess CEO pay assuming such pay is related to total shareholder return (TSR). The second ranking identified the companies where the most shares were voted against the CEO pay package. These two rankings were weighted 2:1, with the regression analysis being the majority. We then excluded those CEOs whose total disclosed compensation (TDC) was in the lowest third of all the S&P 500 CEO pay packages. The full list of the 100 most overpaid CEOs using this methodology is found in Appendix A. The regression analysis of predicted and excess pay performed by HIP Investor is found in Appendix C, and its methodology is more fully explained there.

Figure 1 (below) lists the 25 most overpaid CEOs, identifying the company, the CEO and his pay as reported at the annual shareholder meeting, and the pay of the company’s median employee. Two companies – Comcast and Oracle – have now placed in the top 25 every year. Four companies – Discovery Communications, Regeneron Pharmaceuticals, Walt Disney, and Wynn Resorts – have each appeared the list this year for the second year in a row.

Highlight the titles in any column to sort numerically or alphabetically.

Rank
Company Name
CEO
CEO Pay
Median employee pay
Pay Ratio
1
Fleetcor Technologies Inc Ronald F. Clarke $52,643,810
$34,700
1517
2
Oracle Corp.* Mark V. Hurd/Safra Catz $81,562,244
$89,887
907
3
Broadcom, Inc. Hock Tan $103,211,163
NA 
NA
4
Mondelez International, Inc. Dirk Van de Put $42,442,924
$42,893
990
5
Wynn Resorts Ltd. Stephen Wynn $34,522,695
$44,437
777
6
The Walt Disney Co.* Robert Iger $36,283,680
$46,127
787
7
TransDigm Group, Inc.* W. Nicholas Howley $61,023,102
$46,742
1306
8
American International Group, Inc. Brian Duperreault $43,086,861
$64,186
671
9
Mattel, Inc. Margaret H. Georgiadis $31,275,289
$6,271
4987
10
CSX Corp. E. Hunter Harrison $151,147,286
$98,697
1531
11
Discovery, Inc.* David M. Zaslav $42,247,984
$80,858
522
12
TripAdvisor, Inc. Stephen Kaufer $47,933,462
$99,643
481
13
Fidelity National Information Services, Inc. Gary A. Norcross $29,141,610
$44,556
654
14
Ameriprise Financial, Inc. James Cracchiolo $23,900,309
$107,082
223
15
Ventas, Inc. Debra A. Cafaro $25,254,607
$88,630
285
16
Halliburton Co. Jeffrey A. Miller $23,078,364
$79,636
290
17
Expedia Group, Inc. Mark D Okerstrom $30,720,457
$71,696
428
18
Regeneron Pharmaceuticals, Inc. Leonard S. Schleifer $26,508,058
$123,418
215
19
Jefferies Financial Group, Inc. Richard B. Handler $21,787,285
$44,584
489
20
IQVIA Holdings, Inc. Ari Bousbib $38,029,517
$97,997
388
21
Comcast Corp. Brian Roberts $32,520,224
$71,006
458
22
Allergan Plc Brenton Saunders $32,827,626
$94,064
349
23
Schlumberger NV Paal Kibsgaard $20,759,340
$88,604
234
24
Netflix, Inc. Reed Hastings $24,377,499
$183,304
133
25
AT&T, Inc. Randall  Stephenson $28,720,720
$78,437
366
 

Key Findings

As in prior years, we note that pension funds give CEO pay packages more scrutiny and a greater level of opposition than financial manager controlled funds. Also, in general, European based investment funds vote against CEO pay packages at a greater rate than U.S. based ones.

Over the past five years the number of funds that have markedly increased their level of opposition to S&P 500 CEO pay packages has grown.


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Several funds, with assets of over $100 billion each have more than doubled the number of CEO pay packages they vote against. The largest U.S. pension fund, California Public Employees’ Retirement System (CalPERS, with assets of over $350B) has increased the number of S&P 500 CEO pay packages that it voted against by a factor of almost eight. In 2013 CalPERS opposed only 6.4 percent of S&P 500 CEO pay packages, last year CalPERS opposed 45 percent of them. Figure 2, based on Proxy Insight data, shows funds with AUM over $90 billion in assets that voted against more than forty percent of the S&P 500 CEO pay packages. If the threshold of AUM of $1 billion is used, there were 87 funds that met the same criteria.

The number of S&P 500 companies where large numbers of shares were voted against the CEO pay package has increased.


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While in the aggregate CEO pay packages still receive a large number of positive shareholder votes, that number is declining. In 2018 it declined to 90.4 percent—the lowest level since 2012. In 11 S&P 500 companies the number of positive votes was below 50 percent; in 35 S&P 500 companies, it was below 70 percent. Companies that received overwhelming shareholder opposition to the pay package of their CEO include Fleetcor Technologies, Wynn Resorts Ltd., Ameriprise Financial, and McKesson.

The companies with overpaid CEOs we identified in our first report have markedly underperformed the S&P 500.


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Two years ago, we analyzed how these firms’ stock price performed since we originally identified their CEOs as overpaid. We found then that the 10 companies we identified as having the most overpaid CEOs, in aggregate, underperformed the S&P 500 index by an incredible 10.5 percentage points and actually destroyed shareholder value, with a negative 5.7 percent financial return. The trend continues to hold true as we measure performance to year-end 2018. Last year, these 10 firms again, in aggregate, dramatically underperformed the S&P 500 index, this time by an embarrassing 15.6 percentage points. In analyzing almost 4 years of returns for these 10 companies we find that they lag the S&P 500 by 14.3 percentage points, posting an overall loss in value of over 11 percent.

* First date w voting avilable 2014 **First data w voting available 2015 *** First data w voting available 2016

* First date w voting avilable 2014 **First data w voting available 2015 *** First data w voting available 2016

Two years ago, we analyzed how these firms’ stock price performed since we originally identified their CEOs as overpaid. We found then that the 10 companies we identified as having the most overpaid CEOs, in aggregate, underperformed the S&P 500 index by an incredible 10.5 percentage points and actually destroyed shareholder value, with a negative 5.7 percent financial return. The trend continues to hold true as we measure performance to year-end 2018. Last year, these 10 firms again, in aggregate, dramatically underperformed the S&P 500 index, this time by an embarrassing 15.6 percentage points. In analyzing almost 4 years of returns for these 10 companies we find that they lag the S&P 500 by 14.3 percentage points, posting an overall loss in value of over 11 percent.

If one were to exclude the votes of the three biggest asset managers in the world (Blackrock, Vanguard and State Street, all of which tend to vote to approve almost every CEO pay package presented to them), it would be even more obvious that the number of positive votes is going down dramatically. Together these three funds control between 15 percent and 20 percent of the shares at almost every single public company in America, and their refusal to vote against more than just a very, very few CEO pay packages stands out. A recent paper by Harvard Law School professors Lucian Bebchuk and Scott Hirst analyzed these asset managers and found that they have strong incentives to under-invest in stewardship and defer excessively to the preferences and positions of corporate managers.5

 
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PROXY ADVISOR VOTING RECOMMENDATIONS ON CEO PAY PACKAGES

Financial managers often rely on proxy advisors to evaluate CEO pay packages. The two largest advisors are Institutional Shareholder Services (ISS) and Glass Lewis, but there are also several smaller advisors, such as Egan Jones, Segal Marco and PIRC. In 2018 lobbyists for big business attacked these firms suggesting that fund managers were blindly following their advice.

In fact, it appears that many funds that subscribe to ISS and Glass Lewis vote to approve numerous CEO pay packages that these advisory services advise to vote against. Proxy Insight, an independent data provider tracking the voting records and policies of more than 1,700 global investors, conducted an analysis6 of investor voting correlation with recommendations from ISS and Glass Lewis and found “a clear divergence in actual voting behavior compared to proxy advisor vote recommendations.” (Proxy Insight filed this analysis as an SEC comment letter.) Specifically, Proxy Insight analyzed the voting of the largest 20 asset managers on CEO pay packages at S&P 1500 companies during the period July 1, 2017 to June 30, 2018. The analysis showed that when ISS and Glass Lewis recommended “against” a pay package, the correlation of voting with recommendations was low.

ISS recommended voting against 11.8 percent of the CEO pay packages at S&P 500 companies, and 33 percent of the 100 most overpaid CEOs. These percentages have been fairly unchanged year after year. These numbers are based on the default ISS “standard” policy. ISS also offers some specific ESG policies. This year the ISS SRI policy recommended against approximately 14 percent of these pay packages, and a policy tailored to Taft-Hartley pension plans, recommended against 24 percent. Many users of ISS proxy voting services take advantage of ISS’s ability to create additional custom policies. In the case of CEO pay these custom policies can produce substantial differences from the standard ISS recommendations.

ISS uses a quantitative degree-of-alignment scale to evaluate pay and performance. According to FAQs issued December 2018, ISS will “continue to explore the potential for future use of Economic Value Added (EVA) measures to add additional insight into a company's financial performance” and will display those measures in reports this year.7 Glass Lewis recommended shareholders vote against 9.5 percent of CEO pay packages at S&P 500 companies, and 27 percent of the 100 most overpaid CEOs. These figures are lower than they have been in previous years.

Glass Lewis recommended shareholders vote against 9.5 percent of CEO pay packages at S&P 500 companies, and 27 percent of the 100 most overpaid CEOs. These figures are lower than they have been in previous years.

Glass Lewis, which can also create custom policies, uses a model comparing CEO pay in relation to company peers, and company performance compared to peers, and awards letter grades between A and F. An “A” means that “the company’s percentile rank for executive compensation is significantly less than its percentile rank for company performance.”8

Egan-Jones Proxy Services recommended voting against approximately 30 percent of the CEO pay packages at S&P 500 companies, and against 49 percent of the 100 most overpaid CEOs. Egan-Jones reported to us that in five cases where they did vote in favor of the CEO pay vote, they had opposed stock award or omnibus plans at the same companies.

Segal Marco Advisors, which has one of the most rigorous analyses of CEO pay packages, recommended shareholders vote against 42 percent of CEO pay packages at S&P 500 companies, and 70 percent of the 100 most overpaid CEOs. Maureen O’Brien, vice president and director of corporate governance, notes that the Segal Marco Advisors cast votes for 84 funds that subscribe directly for proxy voting and corporate governance services and additional funds that receive consulting or discretionary services. When analyzing compensation, Segal Marco does a first screen to identify corporations with good financial performance and less-than-anticipated pay. Those companies generally receive a “yes” vote. Those that don’t fit in that category receive a secondary screening on a variety of pay practices (from accelerated vesting to gross-ups).

PIRC, one of the largest proxy advisors in Europe, recommended voting against approximately 72 percent of the CEO pay packages at S&P 500 companies, and 90 percent of the 100 most overpaid CEOs.

 

VOTES OF MANAGERS OF MUTUAL FUNDS AND ETFS

We have analyzed how the largest investors in S&P 500 companies, namely mutual funds, ETFs, and public pension funds, have voted their shares on the issue of CEO pay. This enables us to see which funds are exercising their fiduciary responsibility and which are acquiescing to management in squandering company resources.

The mutual fund section of the report was based on data provided by Morningstar Fund Votes database. An explanation of the Unique Vote count methodology they use can be found in Appendix D.

 
See Appendix D for a full list as well as an explanation of the methodology used in calculating votes. Assets Under Management (AUM) are from Proxy Insight, and taken from most recent data in ADV forms filed at the SEC.

See Appendix D for a full list as well as an explanation of the methodology used in calculating votes. Assets Under Management (AUM) are from Proxy Insight, and taken from most recent data in ADV forms filed at the SEC.

 

One estimate found that as of Dec. 31, 2017, BlackRock, Vanguard, and SSGA held positions of more than $1 billion in 353, 427, and 242 S&P 500 companies, respectively9. Rick Warzman recently wrote in “When it comes to investment giants furthering social good, many see a disconnect between words and action” that “the investment giants all seem to be saying the right things” but their voting does not match. Warzman quotes long-time investor advocate Tim Smith who notes that, “Confidential dialogue is vitally important, but quiet conversation combined with . . . a proxy vote sends a much clearer and less ambiguous message.”10

An important paper by Harvard’s Lucian Bebchuk and Scott Hirst, “Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy”, examines the reluctance of Blackrock, Vanguard, and State Street to vote against management. The study demonstrates “that index funds managers have strong incentives to (i) under-invest in stewardship and (ii) defer excessively to the preferences and positions of corporate managers.”11 They claim that there is no financial incentive for these managers to engage in serious stewardship. In addition, they also claim that deferring to management “could also affect the private interests of the index fund manager.” The deference can spring from a “web of financially-significant business ties” (for example, managing a firm’s 401(k) plan), or from fear of public or political backlash.

The paper concludes with a number of potential reforms, one of which – bring transparency to private engagements – SSGA has already begun.

In a separate paper, Patrick Jahnke interviewed 29 individuals from 20 institutional investors (managing a combined $13.3 trillion) for his paper “Asset Manager Stewardship and the Tension Between Fiduciary Duty and Social License.” Jahnke notes that, in the past it had been a winning strategy to remain neutral, and “kept [large fund managers] out of the limelight and away from regulatory interest, while maximizing the potential client base.” However, he believes it is “doubtful that the same strategy will work in the future, now that asset managers have grown to such a size that they have become household names.” As Jahnke notes, “In a democratic capitalist society, failure to” maintain the “social license” or perceived legitimacy may result in consumer boycotts and “ultimately in calls for stricter regulation.”12

Despite this, Figure 5 shows more funds are voting against more packages. This year there were 87 funds that voted against more than half of the 100 overpaid CEOs.

 
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Below we include profiles of a number of fund managers. We selected those to focus on based on a number of factors including fund practices, changes in guidelines or practices, responsiveness to outreach, and whether they had been profiled in prior years.

Aberdeen Standard Investments (ASI) – AUM $786 billion
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Aberdeen Standard voted against 33 percent of pay packages of the S&P 500 companies; it held just of the 19 of the companies with 100 most overpaid CEO pay packages, and voted against 57 percent of them.

One of the largest changes in levels of voting opposition occurred because of an August 2017 merger between Standard Life and Aberdeen Asset Management, forming a new firm renamed Aberdeen Standard Investments (ASI). As its own company, as covered in last year’s report, Standard Life, which had approximately $384 billion in AUM, opposed only 9.4 percent of CEO pay packages in the S&P 500 in 2017. As part of this merger a new ASI custom policy was implemented for 2018, which included “amended … parameters applied to remuneration votes in North America,” according to a Jan. 17, 2018 email to As You Sow from Mike Everett, ESG Investment Director for ASI.

The votes of the newly merged company are similar to those of Aberdeen in prior years, but now represent approximately twice as many shares, and are much improved over the previous votes by Standard Life.

ASI also issues quarterly Global ESG Investment reports, which cover broad topics as well as details of engagement with specific companies. In its Quarter 3 2018 report, ASI discussed how companies should respond to failed CEO pay advisory votes in the context of one particular engagement. “We are increasingly concerned that, where companies receive high levels of dissent on advisory votes on pay, the only solution offered is more engagement with shareholders…Engagement alone is not enough.” writes Governance and Stewardship Director Deborah Gilshan in that report.13

Allianz Global Investors (AllianzGI) – AUM $598 billion
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Allianz Global Investors voted against 75 percent of the pay packages of S&P 500 companies; it voted against 77 percent of the 100 most overpaid CEO pay packages, and it abstained on an additional 6 percent.14

AllianzGl Analyst Robbie Miles explained in a January 9, 2019 phone interview with As You Sow that, “We apply a corporate governance guideline globally.” The guidelines were completed with the engagement from the full staff, making used of the “thought, wisdom, and experience” of analysts from across the world. The process, according to Miles, was laborious, but left the firm with "confidence that we are representing the views of our fund investors."

"In the U.S. those guidelines are hard on remuneration, because we are taking the view that what is best at incentivizing a human being in Europe is probably what is best an incentivizing a human being in the U.S. or Asia as well," Miles said.

AllianzGl follows three primary beliefs regarding incentives:

  • Incentives should be truly long-term, not inspiring tactical moves to boost quarterly earnings but planning for sustainable growth. In other words, a 12-month performance period or immediate vesting may inspire votes against;
  • Incentives should be stretching. In many cases common metrics, targets, and thresholds are not suitably stretching. Stock options more often reflect changes in market than rewarding individual effort; and
  • Quantum of pay should be in line with peers and performance.

Miles notes that the plans are looked at holistically, with factors ranging from stock ownership guidelines and clawbacks also considered. The AllianzGl Global Proxy Voting Guidelines provide detailed information on the fund’s voting.15

ISS generally does the voting for Allianz using a custom policy that AllianzGl developed with them. If a certain ownership threshold is exceeded, a nine-person ESG team from AllianzGl does additional analysis before the vote is cast.

BlackRock – AUM $6.4 trillion
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BlackRock voted against 2.5 percent of pay packages of the S&P 500 companies; it voted against 12 percent of the 100 most overpaid CEO pay packages.

BlackRock's disclosure is substantially less useful than that of other funds. In "BlackRock Investment Stewardship Engagement Priorities for 2018," the fund says that it supports “compensation that promotes long-termism." In the paragraph that follows BlackRock mentions that it will "seek clarity," "we expect . . . justification," and "we may ask the board to explain."16

The explanations and justifications Blackrock receives from corporate representatives apparently satisfies it more than anyone else; Blackrock votes to approve more CEO pay packages than almost anyone else.

Pacific Investment Management Co. (PIMCO) – AUM $1.7 trillion
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PIMCO voted against 17.5 percent of pay packages of the S&P 500 companies; it voted against 50 percent of the 100 most overpaid CEO pay packages.

This level of opposition represents a significant improvement from 2017, when PIMCO voted against only 1 percent of both the S&P 500 and the 100 most overpaid CEOs.

PIMCO responded to our inquiries noting that the fund used sub-advisors, and proxy voting was done by Parametric Portfolio Associates (PPA).

Seattle–based PPA is an asset manager that works with institutional and individual investors. It also sub-advises a number of mutual funds. These are reported on the respective NP-X filings for each fund, including some for those of parent company Eaton Vance.

Jennifer Sireklove, PPA Director of Responsible Investing, told As You Sow that a new process and structure around proxy voting went into effect in February 2018. The emphasis on more active voting is "tied to our overall thinking on responsible investing." PPA plans to expand its disclosure on its website in the coming year.

State Street Global Advisors (SSGA) – AUM $2.7 trillion
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SSGA voted against 4 percent of pay packages of the S&P 500 companies and abstained on an additional 2.5 percent; it votedagainst 16 percent of the 100 most overpaid CEO pay packages, and abstained on an additional 6 percent.

SSGA uses its proxy voting guidelines and proprietary compensation screens to identify companies with which there are pay concerns. SSGA reports that screened companies are then "reviewed manually by the Asset Stewardship Team to reach a vote decision. The team reviews over 1,400 pay votes annually."

In April 2018, SSGA announced a policy change with a document titled, “Transparency in Pay Evaluation: Adoption of Abstain as a Vote Option on Management Compensation Resolutions.” This codified and explained its new policy of abstaining, rather than its previous policy of voting for, the CEO pay package that State Street had serious reservations about.17

Rakhi Kumar, head of SSGA's Investment Stewardship Team in a November 2018 interview told the Harvard Law School Forum on Corporate Governance and Financial Regulation that the level of "unqualified support for pay proposals has fallen in general. Overall unqualified support from a global perspective fell from 83 to 78 percent. In the U.S. there were 2,300 executive compensation votes—of that, 59 total votes (2.5 percent) were abstains compared to 139 votes 'against' (6 percent)."18

Unlike similar reports issued by peers, SSGAs 2017 Stewardship report names names and lists companies that have adopted specific reforms. For example, "VeriFone Systems, Inc., and Exelon Corporation acted to improve their compensation structure by eliminating upward discretion in payouts and placing a cap on long performance plan awards in the event of negative absolute total shareholder return (TSR)." SSGA also notes that total CEO compensation at Honeywell has been reduced over time, in part due to SSGA’s engagement.19

Vanguard – $4.8 trillion AUM
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Vanguard voted against 3.5 percent of pay packages of the S&P 500 companies; it voted against 14 percent of the 100 overpaid CEO pay packages.

This represents a small upward trend. Two years ago, Vanguard voted against only 1.3 percent of the S&P 500. Vanguard’s votes do not appear to represent the view of Vanguard's founder, recently deceased John Bogle, who wrote, "CEO compensation is seriously out of line, and too often has provided excessive and unreliable lottery-type rewards based on evanescent stock prices rather than durable intrinsic corporate value."20

In its Annual Stewardship Report, Vanguard did identify executive compensation as one of its four areas of concern, yet it rarely votes against CEO pay packages. According to the report, "We discussed executive compensation in about half our engagements. The alignment of pay with relative performance and the magnitude of total compensation were prominent themes in our discussions on this topic." The report goes on to describe seven specific engagements – without naming the companies involved – including two where the fund voted against the packages.

Vanguard, the report continued, "voted against 318 compensation committee members for failing to act on compensation matters in response to shareholder feedback."21

 

Socially Responsible Investing Funds

Many individuals who wish to align their investments – and the shareholder proxy voting of their investments – with their values opt to invest in socially responsible investing (SRI) funds.

As can be seen in Figure 6, some SRI funds are now more likely to vote against excessive pay packages. Notably, Green Century funds formerly had a policy to abstain from all votes on CEO compensation. In its 2018 guidelines that policy changed. The guidelines now read “Green Century will also vote in favor of ‘say on pay’ resolutions for compensation packages that are sustainable and equitable.”22 This year, that policy resulted in opposing 80 percent of the 100 most overpaid CEO pay packages.

Figure_6.PNG

Praxis has informed As You Sow that its policy on voting on compensation proposals is under review in preparation for the 2019 proxy season.

Trillium does not appear on the chart this year because it held fewer than 10 of the 100 most overpaid CEOs. However, it voted against pay at all of them, as well as at all of the 46 S&P 500 companies in its portfolio.

 

VOTES BY PENSION FUNDS

As Figure 7 illustrates, pension funds typically have a higher level of opposition to overpaid CEOs than mutual funds.

 
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California Public Employees’ Retirement System (CalPERS) – AUM $351 billion AUM
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CalPERS voted against 45.4 percent of pay packages of the S&P 500 companies; it voted against 73 percent of the 100 most overpaid CEO pay packages.

This represented a marked improvement. Last year CalPERS voted against only 17 percent of pay packages of the S&P 500 and 53 percent of the overpaid CEO pay packages.

The improvement came from a policy change reported in Pension & Investments, which noted "In 2018, CalPERS officials increased their level of scrutiny when reviewing a company's pay and performance practices, casting a wider net of company plans it would oppose and including more factors such as CEO pay ratio information."23 Simiso Nzima, CalPERS's investment director of global equity governance, explained in multiple interviews that the primary issue was pay beyond what was merited for performance. Specifically, Nzima told Chief Investment Officer,24 "If the CEO pay is going up and the return to shareholders is not, then we do not support that."

Florida State Board of Administration – AUM $203 billion
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The Florida State Board of Administration (FSBA) voted against 54.4 percent of pay packages of the S&P 500 companies; it voted against 79.8 percent of the 100 most overpaid CEO pay packages.
In each year of our report, FSBA has been one of the pension funds that voted against the highest number of overpaid CEO pay packages. FSBA receives reports from both Glass Lewis and ISS, as well as data from Meridian and other advisors, and analyzes the data to make decisions in-house.

In an Oct. 31, 2018 email to As You Sow, Tracy Stewart, senior corporate governance analyst at FSBA, said many of the votes against are based on a lack of adequate disclosure of metrics, thresholds and targets. "Our voting policy does not support a compensation program unless we understand how it is incentivizing performance, and we approve of the metrics, thresholds, and targets used," Stewart said. "Disclosure of metrics as well as targets and thresholds is an important part of our voting decisions, because we don't approve things we don’t understand, and you can't understand what you don't know."

For example, FSBA would likely vote against a plan that "discloses a metric such as EPS [earnings per share], but the threshold and targets the plan uses are far below any recent performance by the company and have been at the same level for years, without discussion or justification." Stewart points out, "If we vote against one program for disclosing inappropriately low targets, we can't and shouldn't support another program that doesn’t disclose them at all."

This emphasis of disclosure of targets came up repeatedly, with multiple funds. "It isn't enough for a company to provide the metrics they use; we need to know levels of thresholds and targets as well," Stewart said. "We need to see the company is using an objective program that focuses executives in advance on the right measures of performance and uses tough but fair performance requirements."

Los Angeles County Employees Retirement Association (LACERA) – AUM $56 billion
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LACERA voted against 13 percent of pay packages of the S&P 500 companies; it voted against 42 percent of the 100 most overpaid CEO pay packages.

According to the fund's Proxy Voting Results and Trends25 report for fiscal Year 2018, overall level of support for CEO pay packages decreased from 86 percent in 2016 to 75 percent in 2018, due to a "move to custom policy with emphasis on pay-forperformance."

Votes are cast in adherence to LACERA’s Corporate Governance Principles adopted in February 2018.26 Each of the principles (accountability, integrity, aligned interest, transparency and prudent risk mitigation) has implications for compensation analyses. LACERA is also moving from comingled funds to separately managed accounts where they will maintain voting authority, which will sharply increase LACERA’s proxy voting activity.

New York State Common Retirement Fund – $192 billion AUM
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New York State voted against 26 percent of pay packages of the S&P 500; it voted against 53 percent of the 100 most overpaid CEO pay packages. This represents the continuation of a trend of increasing opposition. Last year the fund opposed pay at only 17.5 percent of S&P 500 companies.

In addition to improving its voting practices, New York State, under the leadership of New York State Comptroller Thomas P. DiNapoli, has filed shareholder resolutions and negotiated with companies to “reexamine their CEO and executive pay and adopt policies that take into account the compensation of the rest of their workforces.” In December 2018, the New York State Common Retirement Fund announced it had reached agreements with Microsoft Corp., CVS Health Corp., Macy's Inc., The TJX Companies Inc., and Salesforce.com and withdrew its shareholder resolutions with the companies. "We are encouraging companies to adopt policies that take their entire workforce into consideration rather than setting CEO pay solely by benchmarking it against other CEOs," noted DiNapoli in a press release.27

Pennsylvania State Employees’ Retirement System (PSERS) – AUM $28 billion
View Details

Pennsylvania SERS voted against 7.6 percent of pay packages of the S&P 500 companies; it voted against 29 percent of the 100 most overpaid CEO pay packages.

While very low, PSERS's recent performance represents a steep increase from the prior year, when it voted in favor of every CEO pay package. Following that disclosure in our report, an investigation was conducted. Pamela Hiles, acting director of communications and policy for PSERS, told the Council of Institutional Investors, "ISS indicated that due to an internal miscommunication within the ISS team, it incorrectly executed say-on -pay votes on SERS' behalf" In addition, CII noted, "an additional layer of review and sign-off has been added to the controls ISS currently has in place and the proxy advisor and PSERS have quarterly calls to review the proxy votes."28

State of Rhode Island – AUM $8 billion
View Details

Rhode Island voted against 14 percent of pay packages of the S&P 500 companies over the past proxy season; it voted against 36 percent of the 100 most overpaid CEO pay packages.

Since taking office in 2015, State Treasurer Seth Magaziner has been focused on "working to encourage companies to adopt responsible business practices, so that they are sustainable for years to come." He moved the state’s proxy voting decisions in house, rather than deferring to recommendations from an advisory service.29 Opposition votes are likely to be much higher in the upcoming proxy season. In September 2018, Rhode Island adopted new guidelines. On CEO pay, the fund included somewhat standard language regarding the analysis: "Vote against management say on pay proposals where there is a misalignment between CEO pay and company performance; the company maintains problematic pay practices; the board exhibits a significant level of poor communication and responsiveness to shareholders or if the board has failed to demonstrate good stewardship of investors’ interests regarding executive compensation practices." It included a specific matrix as well, noting that votes will be cast against packages in which:

  • CEO pays is above 75th percentile of peers and company performance is below peer median;
  • Performance-based pay is less than 50 percent of CEO compensation;
  • CEO pay exceeds 4 times named executive officer (NEO)pay;
  • Potential dilution from equity-based incentives exceeds 4 percent of shares outstanding.30

State Board of Investments of Minnesota (SBI) – AUM $93 billion
View Details

Minnesota's SBI voted against 77.4 percent of pay packages of the S&P 500 companies; it voted against 91.7 percent of the 100 most overpaid CEO pay packages.

The State Board of Investments of Minnesota (SBI) votes proxies for Minnesota State Retirement System (MSRS), Public Employees Retirement Association (PERA), and Teachers Retirement, based on the guidance of a four-person proxy committee made up of one individual each from the offices of the governor, secretary of state, attorney general, state auditor. The group is interested in promoting compensation plans that align management and shareholders. The biggest drivers of votes against CEO pay packages are low performance grades, poor disclosure practices, excise tax gross ups and single trigger change-in-control provisions. Like other funds, SBI votes against any plans that receive D or F pay for performance grades from Glass Lewis. For funds with C grades, they vote against in several circumstances:

  • Total compensation to CEO is four times more than the average NEO;
  • Excessive NEO compensation compared to its Peer Group;
  • Poor company performance compared to its competitors;
  • Poor disclosure of compensation practices

Pension funds that approve most CEO pay packages:

Employee Retirement System of Georgia (ERSG)

The trustees of the ERSG adopted has a policy to “vote and execute all voting proxies in support of management” with an exception if the Chief Investment Officer and the Co-Chief Investment Officer of the Division of Investment Services believe that “such a vote would be detrimental to the best interests or rights of the Retirement System.” According to data collected by Proxy Insight, the fund voted against only one of the overpaid CEOs: Verizon.31

Pension funds with lots of External Managers and many Comingled funds

Far more common than funds with explicit guidelines to routinely support management are funds that delegate their voting responsibilities to external managers, without providing directions on voting matters. In some cases, a fund may have just four or five managers for U.S. public equities. In other cases, it is more complex. One fund told us it had “contracts with 14 external investment advisors who managed 22 portfolios that comprised 77.3 percent of the U.S. Public Equity portfolio.”

Thus, we (and they) are unable to create assessments on how their shares are voted on the CEO pay or any other issue. As we’ve noted before, many financial fund managers are more inclined than the pension funds themselves to approve expensive CEO pay packages. While there are some managers that have significant levels of opposition, those tend not to be the ones that these pension funds use. In fact, BlackRock is by far the most common external money manager.

Examples of public funds that use external managers, often with comingled funds, include:

  • The State of Missouri delegates to individual investment managers the responsibility for voting proxies in the best interests of the members of the system’s members. According to the PSRS/PEERS of Missouri Comprehensive Annual Financial Report, the largest fund manager for large-cap equity is BlackRock.32

  • Iowa Public Employees Retirement Systems uses comingled funds at BlackRock and Mellon Capital Management, which vote quite differently. It has separate accounts at Columbia, J.P Morgan, Panagora Asset and Wellington Management. In all cases managers are allowed to vote proxies according to their own policies.

  • Voting for Idaho Public Employees Retirement Systems is handled externally by the following managers: Peregrine, Tukman, and MCM.

  • Nevada Public Employees Retirement Systems has assets with Alliance Bernstein and BlackRock, who have different voting records, and smaller percentages with two others funds.

 

Pay Ratio Disclosure

When shareholders were evaluating compensation packages in spring 2018, they had a new piece of information: the ratio of the pay of the CEO to the pay of the corporation’s median worker. This was due to the implementation of a much-delayed provision of the Dodd-Frank Act that recently took effect.

The AFL-CIO has been tracking these ratios as they appear in company proxy statements. The average of these CEO pay to median worker pay ratios as of Sep. 5, 2018 was approximately 273:1. This contrasts sharply with around the world as reported in a BBC article. In the United Kingdom — the only other non-U.S. country besides India where CEOs make more than 200 times their employees — the ratio is estimated at 201:1. In the Netherlands the ratio is 171:1; in Switzerland it is 152:1. In Germany, where workers are represented on boards of directors, it is 136:1.33

This information can be quite illustrative of pay practices at particular companies. For example, we learned this year that the median employee at Walmart, which has appeared on our overpaid CEO list for several years, was paid $19,177, and the pay ratio of the CEO to median worker was 1,188:1.

On the other hand, Costco’s median employee was paid $38,810, and the CEO’s pay, while in the multi-millions, is much lower than at Walmart. The Costco CEO to median worker pay ratio was 191:1, one fifth of the ratio at Walmart.

While we did not include pay ratio as a criterion in identifying overpaid CEOs, we did find a predictable correlation between our list of overpaid CEOs and the pay ratio. The median pay ratio for the S&P 500 is 142:1, while the median for companies on As You Sow’s list of the 100 most overpaid CEOs is over twice as much, namely 300:1. In comparing our overpaid list to pay ratio data collected by the AFL-CIO, we found that the vast majority of the companies we identified were in the highest quartile of pay ratios.

It is not clear how funds will use this information. As Jocelyn Brown, senior investment manager at RPMI Railpen, told us, “On pay ratios, we recognize it is early days, and, like many others, we would be cautious of putting too much focus on a single number without seeing how it compares to peers and changes over time.”

Établissement de Retraite Additionnelle de la Fonction Publique (ERAFP), the asset manager for France’s public pension fund, does have a rule on pay ratios, as described in the UN PRI report: “ERAFP has set a ‘socially acceptable maximum amount of total remuneration,’ inclusive of salary, benefits, options, bonus shares, and top-up pension plan contributions, at ‘100 times the minimum salary in force in the country in which the company’s registered office is located.’”34

We expect any policies on using pay ratio as a criterion in voting on pay packages to evolve slowly over time. It is likely, however, that the newly disclosed number will soon be one of many factors shareholders consider when voting on the CEO pay package.

Pay ratio information is also being used in taxation. The city of Portland, Oregon “levies a 10 percent surtax on firms that surpass [a ratio of 100:1]. It rises to 25 percent on firms with pay gaps exceeding 250 to 1.” Similar pay gap tax bills have been introduced in California, Connecticut, Illinois, Massachusetts, Minnesota, and Rhode Island. On the federal level Representative Mark DeSaulnier (D-CA), has proposed similar legislation.35

 

CONCLUSION

Addressing the Council of Institutional Investors meeting in fall 2018, Carol Bowie, who for years led the compensation analysis team at ISS, said, “The key to moderating and controlling CEO pay is investors. They are really the only solution.”

She’s right.

In the five years As You Sow has been publishing this report, our research has increasingly demonstrated that all investors, from managers of the largest asset funds to the individuals contributing to a public pension or a 401(k) plan, can play a critical role in the effort to reverse the practices that have allowed CEO compensation packages to rise unabated — often without any nexus to corporate performance.

As we’ve noted in this report, the UN PRI and other studies have shown why shareholder engagement matters. “Voting against excessive pay proposals offers a tool that investors can use to intervene when proposed compensation appears to be out of line with their interests or with a sense of appropriateness.”36

In this report we’ve showcased how investors have taken a stance to moderate the excesses of CEO pay, highlighting corporate behaviors that have most frequently triggered votes against irresponsible compensation packages. Fund managers have a fiduciary obligation to consider these practices when deciding whether to support specific compensation packages. By connecting questionable corporate tactics and “no” votes on CEO compensation, this report can serve as a roadmap for institutional investors to consider revisiting their guidelines to, as PRI puts it, “reframe how CEO compensation is incentivized.”37

But the right — and responsibility — to be a watchdog does not rest with the funds alone. All shareholders can and must hold their funds accountable to ensure that corporations they entrust with their money are acting as proper stewards of their investments.

Every investor has a role to play. Union leaders should speak to their fund trustees. Teachers should contact funds such as TIAA/Nuveen; state and local government employees should reach out to their employers and their pension funds. Individual investors concerned about votes can offer feedback to their money managers; they may also choose to move their retirement accounts to social investment funds (and, in the process, let prior funds know they’re doing so, and why).

We concluded our 2018 study by urging shareholders to have their voices heard. We’re pleased to say that this advice is beginning to take hold — progress is evident in this 2019 report. But there is a long way to go.

 

APPENDIX A – THE 100 MOST OVERPAID CEOs

Highlight the titles in any column to sort numerically or alphabetically.

Rank
Company
CEO
Pay
Excess
Votes to Approve CEO Pay
CEO:Worker
Pay Ratio
1
Fleetcor Technologies Inc Ronald F. Clarke
52,643,810
38,159,825
14%
1517
2
Oracle Corp. Mark V. Hurd/Safra Catz
81,562,244
67,900,531
49%
907
3
Broadcom, Inc. Hock Tan
103,211,163
86,868,639
62%
NA
4
Mondelez International, Inc. Dirk Van de Put
42,442,924
28,757,373
45%
990
5
Wynn Resorts Ltd. Stephen Wynn
34,522,695
20,906,213
20%
777
6
The Walt Disney Co. Robert Iger
36,283,680
22,408,282
46%
787
7
TransDigm Group, Inc. W. Nicholas Howley
61,023,102
46,040,922
64%
1306
8
American International Group, Inc. Brian Duperreault
43,086,861
29,693,425
62%
671
9
Mattel, Inc. Margaret H. Georgiadis
31,275,289
19,264,188
46%
4987
10
CSX Corp. E. Hunter Harrison
151,147,286
136,387,791
78%
1531
11
Discovery, Inc. David M. Zaslav
42,247,984
29,692,839
69%
NA
12
TripAdvisor, Inc. Stephen Kaufer
47,933,462
35,018,668
75%
481
13
Fidelity National Information Services, Inc. Gary A. Norcross
29,141,610
14,606,759
56%
654
14
Ameriprise Financial, Inc. James Cracchiolo
23,900,309
9,879,197
25%
223
15
Ventas, Inc. Debra A. Cafaro
25,254,607
11,969,664
59%
285
16
Halliburton Co. Jeffrey A. Miller
23,078,364
9,828,762
43%
290
17
Expedia Group, Inc. Mark D Okerstrom
30,720,457
16,588,563
79%
428
18
Regeneron Pharmaceuticals, Inc. Leonard S. Schleifer
26,508,058
12,855,143
67%
215
19
Jefferies Financial Group, Inc. Richard B. Handler
21,787,285
8,862,271
51%
489
20
IQVIA Holdings, Inc. Ari Bousbib
38,029,517
23,710,232
88%
388
21
Comcast Corp. Brian Roberts
32,520,224
18,700,417
87%
458
22
Allergan Plc Brenton Saunders
32,827,626
19,362,274
91%
349
23
Schlumberger NV Paal Kibsgaard
20,759,340
7,653,135
66%
234
24
Netflix, Inc. Reed Hastings
24,377,499
6,717,787
61%
133
25
AT&T, Inc. Randall Stephenson
28,720,720
15,455,913
90%
366
26
BlackRock, Inc. Laurence D. Fink
27,743,233
13,534,946
89%
195
27
Ralph Lauren Corp. Patrice Louvet
23,792,036
11,075,567
88%
1038
28
Omnicom Group, Inc. John D. Wren
23,959,325
10,454,317
87%
596
29
Thermo Fisher Scientific, Inc. Marc N. Casper
22,275,176
7,849,780
77%
324
30
General Dynamics Corp. Phebe Novakovic
21,501,429
6,989,333
68%
218
31
Centene Corp. Michael F. Neidorff
25,259,468
9,720,247
88%
379
32
Duke Energy Corp. Lynn Good
21,415,936
7,842,750
82%
175
33
Johnson & Johnson Alex Gorsky
29,802,564
16,064,973
92%
452
34
PepsiCo, Inc. Indra Nooyi
31,082,648
17,426,678
92%
650
35
Booking Holdings, Inc. Glenn D. Fogel
27,774,458
13,381,993
91%
599
36
McKesson Corp. John H. Hammergren
18,143,017
4,845,682
27%
473
37
Raytheon Co. Thomas A. Kennedy
24,883,871
9,998,351
90%
172
38
The Goldman Sachs Group, Inc. Lloyd Blankfein
21,995,266
8,317,965
88%
163
39
Twenty-First Century Fox, Inc. James Murdoch
20,315,944
6,402,830
78%
300
40
Western Digital Corp. Stephen Milligan
17,907,624
4,381,912
42%
1628
41
Walmart, Inc. C. Douglas McMillon
22,791,276
9,372,617
91%
1188
42
Lennar Corp. Stuart Miller
19,127,533
5,499,861
77%
NA
43
Valero Energy Corp. Joseph W. Gorder
22,532,260
7,417,930
87%
117
44
Pfizer Inc. Ian Read
27,913,775
14,246,994
93%
313
45
Activision Blizzard, Inc. Robert A. Kotick
28,698,375
12,835,277
92%
306
46
American Express Co. Kenneth Chenault
18,611,373
5,084,279
70%
327
47
Humana, Inc. Bruce Broussard
19,768,523
4,686,890
66%
344
48
Freeport-McMoRan, Inc. Richard Adkerson
18,396,037
5,864,506
87%
277
49
SL Green Realty Corp. Marc Holliday
17,407,821
4,008,284
61%
303
50
Abbott Laboratories Miles White
18,971,019
4,949,219
79%
251
51
International Business Machines Corp. Virginia Rometty
18,595,350
5,764,002
89%
341
52
Exxon Mobil Corp. Darren Woods
17,466,133
4,318,642
73%
108
53
JPMorgan Chase & Co. James Dimon
28,313,787
14,064,814
93%
364
54
PayPal Holdings, Inc. Daniel H. Schulman
19,218,634
5,355,127
88%
274
55
Chevron Corp. John S. Watson
24,781,568
11,372,830
93%
180
56
ConocoPhillips Ryan M. Lance
21,848,930
8,378,848
93%
137
57
Aetna, Inc. Mark T. Bertolini
18,750,816
3,989,782
85%
235
58
DXC Technology Co. J. Michael Lawrie
18,683,970
2,629,413
58%
806
59
Marathon Petroleum Corp. Gary Heminger
19,670,807
5,420,391
92%
935
60
Lockheed Martin Corp. Marillyn Hewson
22,866,843
8,049,435
94%
186
61
3M Co. Inge Thulin
20,494,285
6,405,120
93%
324
62
Verizon Communications, Inc. Lowell McAdam
17,937,581
4,579,605
92%
142
63
Phillips 66 Greg Garland
23,650,896
9,441,198
94%
138
64
McDonald's Corp. Stephen J. Easterbrook
21,761,052
7,826,965
94%
3101
65
Newell Brands, Inc. Michael B. Polk
15,257,808
2,101,098
76%
NA
66
Capital One Financial Corp. Richard Fairbank
16,175,770
2,452,196
85%
261
67
Prologis, Inc. Hamid R. Moghadam
19,352,127
5,247,307
93%
204
68
The TJX Cos., Inc. Ernie Herrman
16,880,171
2,792,788
90%
1501
69
Apache Corp. John J. Christmann
14,433,373
2,052,074
79%
99
70
CenturyLink, Inc. Glen F. Post III
14,715,560
1,990,675
79%
212
71
Express Scripts Holding Co. Timothy Wentworth
15,895,415
2,543,661
89%
303
72
L3 Technologies, Inc. Michael T. Strianese
19,712,866
5,303,410
94%
250
73
Alexion Pharmaceuticals, Inc. Ludwig N. Hantson
15,310,067
1,851,411
79%
92
74
Procter & Gamble Co. David S. Taylor
17,354,256
4,075,547
93%
287
75
Corning, Inc. Wendell Weeks
16,868,575
2,674,376
90%
356
76
Intel Corp. Brian M. Krzanich
21,544,700
7,193,973
94%
211
77
Incyte Corp. Herve Hoppenot
16,087,031
1,328,719
72%
64
78
Motorola Solutions, Inc. Gregory Q. Brown
15,339,548
1,092,756
69%
148
79
eBay, Inc. Devin N. Wenig
17,670,591
3,892,818
93%
144
80
Invesco Ltd. Martin Flanagan
13,805,195
796,159
62%
141
81
Wells Fargo & Co. Timothy Sloan
17,564,014
3,898,497
93%
NA
82
Nektar Therapeutics Inc Howard Robin
18,097,411
2,754,274
92%
91
83
Bank of America Corp. Brian Moynihan
21,779,832
7,474,034
95%
250
84
HCA Healthcare, Inc. R. Milton Johnson
17,268,724
2,615,147
91%
312
85
Prudential Financial, Inc. John Strangfeld
27,111,399
13,509,684
96%
268
86
The Allstate Corp. Thomas J. Wilson
18,757,329
4,631,671
94%
230
87
Eversource Energy James J. Judge
15,915,461
2,153,505
90%
127
88
Ingersoll-Rand Plc Michael W. Lamach
18,797,876
4,567,501
94%
335
89
The Travelers Cos., Inc. Alan D. Schnitzer
15,233,759
1,410,586
85%
154
90
Roper Technologies, Inc. Brian D. Jellison
29,158,675
14,878,308
96%
353
91
Cummins, Inc. N. Thomas Linebarger
16,387,661
2,870,823
93%
275
92
International Paper Co. Mark S. Sutton
19,446,293
5,912,629
95%
230
93
Adobe Systems, Inc. Shantanu Narayen
21,934,033
6,146,315
95%
NA
94
AbbVie, Inc. Richard Gonzalez
22,625,243
8,090,876
95%
144
95
Gilead Sciences, Inc. John F. Milligan
15,438,459
1,824,751
89%
94
96
Cigna Corp. David Cordani
17,595,792
3,274,520
93%
279
97
Honeywell International, Inc. Darius Adamczyk
16,500,153
2,419,282
93%
328
98
Electronic Arts, Inc. Andrew Wilson
35,728,764
19,673,861
97%
371
99
Anadarko Petroleum Corp. R. A. Walker
16,959,896
4,079,365
94%
106
100
Tiffany & Co. Alessandro Bogliolo
13,976,418
-78,585
72%
436

NOTE: Due to timing of the SEC rule implementation, some of the companies on the above list were not required to include pay ratio data in the proxy statement covered by this report. If so, we have used pay ratio data that has since been released. These companies are marked with an *. Also, for the purposes of this report, we considered the disclosed pay of the highest paid CEO if there was a CEO change during the year covered.

 

Appendix B – S&P 500 Companies with Most Shareholder Votes Against CEO Pay

This table shows the 100 companies where the most shareholder votes were cast against the CEO pay package. Vote data from Morningstar Fund Votes database; Compensation data from ISS. These are ranked by level of opposition. The votes are not binding.

Highlight the titles in any column to sort numerically or alphabetically.

Rank
Company
CEO
Votes Against
Pay
1
Fleetcor Technologies Inc
Ronald F. Clarke
86%
$52,643,810
2
Wynn Resorts Ltd.
Stephen Wynn
80%
$34,522,695
3
Ameriprise Financial, Inc.
James Cracchiolo
75%
$23,900,309
4
McKesson Corp.
John H. Hammergren
73%
$18,143,017
5
Western Digital Corp.
Stephen Milligan
58%
$17,907,624
6
Halliburton Co.
Jeffrey A. Miller
57%
$23,078,364
7
Mondelez International, Inc.
Dirk Van de Put
55%
$42,442,924
8
The Walt Disney Co.
Robert Iger
55%
$36,283,680
9
Mattel, Inc.
Margaret H. Georgiadis
54%
$31,275,289
10
Oracle Corp.
Mark V. Hurd
51%
$81,562,244
11
Jefferies Financial Group, Inc.
Richard B. Handler
49%
$21,787,285
12
Envision Healthcare Corp.
Christopher A. Holden
48%
$7,323,638
13
Johnson Controls International Plc
George Oliver
45%
$12,592,505
14
Fidelity National Information Services, Inc.
Gary A. Norcross
44%
$29,141,610
15
DXC Technology Co.
J. Michael Lawrie
42%
$18,683,970
16
Ventas, Inc.
Debra A. Cafaro
41%
$25,254,607
17
FLIR Systems, Inc.
James J. Cannon
40%
$8,985,273
18
SL Green Realty Corp.
Marc Holliday
39%
$17,407,821
19
Netflix, Inc.
Reed Hastings
39%
$24,377,499
20
Invesco Ltd.
Martin Flanagan
38%
$13,805,195
21
American International Group, Inc.
Brian Duperreault
38%
$43,086,861
22
Broadcom, Inc.
Hock Tan
38%
$103,211,163
23
FMC Corp.
Pierre Brondeau
38%
$13,011,873
24
Harley-Davidson, Inc.
Matthew Levatich
37%
$11,116,676
25
TransDigm Group, Inc.
W. Nicholas Howley
36%
$61,023,102
26
Mylan NV
Heather Bresch
34%
$12,744,397
27
Schlumberger NV
Paal Kibsgaard
34%
$20,759,340
28
Humana, Inc.
Bruce Broussard
34%
$19,768,523
29
Synchrony Financial
Margaret M. Keane
34%
$13,525,503
30
Regeneron Pharmaceuticals, Inc.
Leonard S. Schleifer
33%
$26,508,058
31
Norwegian Cruise Line Holdings Ltd.
Frank Del Rio
32%
$10,494,213
32
General Dynamics Corp.
Phebe Novakovic
32%
$21,501,429
33
Ball Corp.
John Hayes
31%
$12,932,654
34
Discovery, Inc.
David M. Zaslav
31%
$42,247,984
35
Motorola Solutions, Inc.
Gregory Q. Brown
31%
$15,339,548
36
Charter Communications, Inc.
Thomas M. Rutledge
30%
$7,813,316
37
American Express Co.
Kenneth Chenault
30%
$18,611,373
38
Incyte Corp.
Herve Hoppenot
28%
$16,087,031
39
Tiffany & Co.
Alessandro Bogliolo
28%
$13,976,418
40
Exxon Mobil Corp.
Darren Woods
27%
$17,466,133
41
Hologic, Inc.
Stephen MacMillan
26%
$11,204,908
42
TechnipFMC Plc
Douglas J. Pferdehirt
26%
$12,688,100
43
Sealed Air Corp.
Jerome A. Peribere
26%
$10,888,951
44
TripAdvisor, Inc.
Stephen Kaufer
25%
$47,933,462
45
Alphabet, Inc.
Sundar Pichai
25%
$1,333,557
46
Newell Brands, Inc.
Michael B. Polk
24%
$15,257,808
47
Thermo Fisher Scientific, Inc.
Marc N. Casper
23%
$22,275,176
48
Lennar Corp.
Stuart Miller
23%
$19,127,533
49
CSX Corp.
E. Hunter Harrison
22%
$151,147,286
50
Twenty-First Century Fox, Inc.
James Murdoch
22%
$20,315,944
51
Expedia Group, Inc.
Mark D Okerstrom
21%
$30,720,457
52
Alexion Pharmaceuticals, Inc.
Ludwig N. Hantson
21%
$15,310,067
53
Apache Corp.
John J. Christmann
21%
$14,433,373
54
Abbott Laboratories
Miles White
21%
$18,971,019
55
Martin Marietta Materials, Inc.
C. Howard Nye
21%
$8,989,165
56
CenturyLink, Inc.
Glen F. Post III
21%
$14,715,560
57
CF Industries Holdings, Inc.
W. Anthony Will
21%
$9,462,015
58
Duke Energy Corp.
Lynn Good
18%
$21,415,936
59
Aon Plc
Gregory C. Case
17%
$14,609,682
60
Waters Corp.
Christopher O'Connell
17%
$7,599,988
61
Nielsen Holdings Plc
Dwight M. Barns
16%
$10,202,194
62
UDR, Inc.
Thomas W. Toomey
16%
$7,780,919
63
QUALCOMM, Inc.
Steven Mollenkopf
15%
$11,591,310
64
The Travelers Cos., Inc.
Alan D. Schnitzer
15%
$15,233,759
65
Aetna, Inc.
Mark T. Bertolini
15%
$18,750,816
66
Capital One Financial Corp.
Richard Fairbank
15%
$16,175,770
67
Monster Beverage Corp.
Rodney Cyril Sacks
15%
$12,505,080
68
Equifax, Inc.
Paulino do Rego Barros Jr.
15%
$3,724,434
69
Advance Auto Parts, Inc.
Thomas R. Greco
14%
$6,127,997
70
Vornado Realty Trust
Steven Roth
14%
$10,467,517
71
Willis Towers Watson Plc
John J. Haley
13%
$4,071,068
72
Comcast Corp.
Brian Roberts
13%
$32,520,224
73
F5 Networks, Inc.
Francois Locoh-Donou
13%
$11,892,265
74
Freeport-McMoRan, Inc.
Richard Adkerson
13%
$18,396,037
75
Symantec Corp.
Gregory S. Clark
13%
$6,059,752
76
Valero Energy Corp.
Joseph W. Gorder
13%
$22,532,260
77
Omnicom Group, Inc.
John D. Wren
13%
$23,959,325
78
Qorvo, Inc.
Robert A. Bruggeworth
13%
$6,941,777
79
Ralph Lauren Corp.
Patrice Louvet
12%
$23,792,036
80
The Goldman Sachs Group, Inc.
Lloyd Blankfein
12%
$21,995,266
81
IQVIA Holdings, Inc.
Ari Bousbib
12%
$38,029,517
82
Centene Corp.
Michael F. Neidorff
12%
$25,259,468
83
Kohl's Corp.
Kevin Mansell
12%
$11,339,206
84
PayPal Holdings, Inc.
Daniel H. Schulman
12%
$19,218,634
85
C.H. Robinson Worldwide, Inc.
John P. Wiehoff
12%
$6,834,187
86
Express Scripts Holding Co.
Timothy Wentworth
11%
$15,895,415
87
Macerich Co.
Arthur M. Coppola
11%
$12,834,624
88
International Business Machines Corp.
Virginia Rometty
11%
$18,595,350
89
MGM Resorts International
James Joseph Murren
11%
$14,579,720
90
Gilead Sciences, Inc.
John F. Milligan
11%
$15,438,459
91
Loews Corp.
James S. Tisch
11%
$6,527,773
92
BlackRock, Inc.
Laurence D. Fink
11%
$27,743,233
93
The TJX Cos., Inc.
Ernie Herrman
10%
$16,880,171
94
Snap-On, Inc.
Nicholas Pinchuk
10%
$10,030,633
95
Stericycle, Inc.
Charles A. Alutto
10%
$3,815,641
96
Gartner, Inc.
Eugene A. Hall
10%
$11,874,230
97
Quest Diagnostics, Inc.
Stephen H. Rusckowski
10%
$10,348,018
98
Raytheon Co.
Thomas A. Kennedy
10%
$24,883,871
99
Eversource Energy
James J. Judge
10%
$15,915,461
100
AT&T, Inc.
Randall Stephenson
10%
$28,720,720
 

APPENDIX C – HIP INVESTOR REGRESSION ANALYSIS

This table lists Overpaid CEOs, as calculated by the HIP Investor regression analysis, seeking to link CEO pay amount to company financial performance.

Although we, like many other analysts, find very weak links between pay amounts and company financial performance, the usual justification for high executive pay is that they are connected to enhanced profits and above-average capital appreciation for the shareholders who foot the bill. If we grant the assumption that pay should be determined by performance, and then use a basic statistical technique to map actual performance outcomes to predicted levels of pay relative to those outcomes, we can then see how much the CEO pay package exceeded such a prediction. Those with highest excess are ranked in the table below – and constitute this list of Overpaid CEOs of the S&P 500.

Executive pay data series included:

  • Raw data: Simply looking at every ISS-identified executive's pay package, in each year, as a single data point value – including pay, bonus, stock grants and stock options – to be paired with financial performance for that year.

  • The series is supplemented using a Thomson Reuters Asset4 data set that captures the single largest pay package for each (company, year) pair. If ISS did not report a CEO for a given pair, and that pair was available in the Asset4 series, the Asset4 data were included. Where ISS identifies multiple co-CEOs who split the job (like Oracle), their pay packages are added together. Once the full set of pay packages is assembled, each (company, year) value is paired with the performance for that year, and this full set is used for the regression.

Each type of executive pay could be reported in any year analyzed from 2007-2018, though not every company was reported for every year.

Financial performance series included:

  • Return on invested capital (ROIC — cash flow available to pay both debt and equity capital owners, adjusted for tax effects, divided by the total value of that capital). ROIC is sourced from Thomson Reuters WorldScope, which sources data from companies’ annual reports and investor filings.

  • Total return (capital gains and dividends) on the company’s primary equity. This is calculated from the Thomson Reuters DataStream Return Index series, using trailing periods behind Jun. 30 of the year of the pay package as identified by ISS (or matching the year for the supplementary largest package data from Asset4). Both performance factors were calculated across one-year, three-year, and five-year windows, trailing behind each possible pay year. Thus, data was considered as far back as 2002 (for the five-year window trailing pay data from 2007).

Highlight the titles in any column to sort numerically or alphabetically.

Rank
Company
Expected CEO Pay Based on Performance
Actual CEO Pay
Amount of Overpay
Excess Pay
1
CSX Corp.
$14,759,495
$151,147,286
$136,387,791
924%
2
Broadcom, Inc.
$16,342,524
$103,211,163
$86,868,639
532%
3
Oracle Corp.
$13,661,713
$81,562,244
$67,900,531
497%
4
CBS Corp.
$13,311,377
$69,332,723
$56,021,346
421%
5
TransDigm Group, Inc.
$14,982,180
$61,023,102
$46,040,922
307%
6
Fleetcor Technologies Inc
$14,483,985
$52,643,810
$38,159,825
263%
7
TripAdvisor, Inc.
$12,914,794
$47,933,462
$35,018,668
271%
8
American International Group, Inc.
$13,393,436
$43,086,861
$29,693,425
222%
9
Discovery, Inc.
$12,555,145
$42,247,984
$29,692,839
236%
10
Mondelez International, Inc.
$13,685,551
$42,442,924
$28,757,373
210%
11
IQVIA Holdings, Inc.
$14,319,285
$38,029,517
$23,710,232
166%
12
The Walt Disney Co.
$13,875,398
$36,283,680
$22,408,282
161%
13
Wynn Resorts Ltd.
$13,616,482
$34,522,695
$20,906,213
154%
14
Electronic Arts, Inc.
$16,054,903
$35,728,764
$19,673,861
123%
15
Allergan Plc
$13,465,352
$32,827,626
$19,362,274
144%
16
Mattel, Inc.
$12,011,101
$31,275,289
$19,264,188
160%
17
Comcast Corp.
$13,819,807
$32,520,224
$18,700,417
135%
18
PepsiCo, Inc.
$13,655,970
$31,082,648
$17,426,678
128%
19
Expedia Group, Inc.
$14,131,894
$30,720,457
$16,588,563
117%
20
Johnson & Johnson
$13,737,591
$29,802,564
$16,064,973
117%
21
AT&T, Inc.
$13,264,807
$28,720,720
$15,455,913
117%
22
Roper Technologies, Inc.
$14,280,367
$29,158,675
$14,878,308
104%
23
Fidelity National Information Services, Inc.
$14,534,851
$29,141,610
$14,606,759
100%
24
Pfizer Inc.
$13,666,781
$27,913,775
$14,246,994
104%
25
JPMorgan Chase & Co.
$14,248,973
$28,313,787
$14,064,814
99%
26
BlackRock, Inc.
$14,208,287
$27,743,233
$13,534,946
95%
27
Prudential Financial, Inc.
$13,601,715
$27,111,399
$13,509,684
99%
28
Booking Holdings, Inc.
$14,392,465
$27,774,458
$13,381,993
93%
29
Regeneron Pharmaceuticals, Inc.
$13,652,915
$26,508,058
$12,855,143
94%
30
Activision Blizzard, Inc.
$15,863,098
$28,698,375
$12,835,277
81%
31
Ventas, Inc.
$13,284,943
$25,254,607
$11,969,664
90%
32
Chevron Corp.
$13,408,738
$24,781,568
$11,372,830
85%
33
Ralph Lauren Corp.
$12,716,469
$23,792,036
$11,075,567
87%
34
Omnicom Group, Inc.
$13,505,008
$23,959,325
$10,454,317
77%
35
Morgan Stanley
$14,145,691
$24,509,722
$10,364,031
73%
36
Raytheon Co.
$14,885,520
$24,883,871
$9,998,351
67%
37
Ameriprise Financial, Inc.
$14,021,112
$23,900,309
$9,879,197
70%
38
Halliburton Co.
$13,249,602
$23,078,364
$9,828,762
74%
39
Centene Corp.
$15,539,221
$25,259,468
$9,720,247
63%
40
Phillips 66
$14,209,698
$23,650,896
$9,441,198
66%
41
Walmart, Inc.
$13,418,659
$22,791,276
$9,372,617
70%
42
Aflac, Inc.
$13,780,155
$22,830,984
$9,050,829
66%
43
Jefferies Financial Group, Inc.
$12,925,014
$21,787,285
$8,862,271
69%
44
General Motors Co.
$13,536,586
$21,958,048
$8,421,462
62%
45
ConocoPhillips
$13,470,082
$21,848,930
$8,378,848
62%
46
The Goldman Sachs Group, Inc.
$13,677,301
$21,995,266
$8,317,965
61%
47
Viacom, Inc.
$12,142,992
$20,315,158
$8,172,166
67%
48
AbbVie, Inc.
$14,534,367
$22,625,243
$8,090,876
56%
49
Lockheed Martin Corp.
$14,817,408
$22,866,843
$8,049,435
54%
50
Thermo Fisher Scientific, Inc.
$14,425,396
$22,275,176
$7,849,780
54%
51
Duke Energy Corp.
$13,573,186
$21,415,936
$7,842,750
58%
52
Universal Health Services, Inc.
$13,800,951
$21,630,861
$7,829,910
57%
53
McDonald's Corp.
$13,934,087
$21,761,052
$7,826,965
56%
54
Schlumberger NV
$13,106,205
$20,759,340
$7,653,135
58%
55
Bank of America Corp.
$14,305,798
$21,779,832
$7,474,034
52%
56
Valero Energy Corp.
$15,114,330
$22,532,260
$7,417,930
49%
57
Intel Corp.
$14,350,727
$21,544,700
$7,193,973
50%
58
Visa, Inc.
$14,735,735
$21,734,454
$6,998,719
47%
59
General Dynamics Corp.
$14,512,096
$21,501,429
$6,989,333
48%
60
Netflix, Inc.
$17,659,712
$24,377,499
$6,717,787
38%
61
3M Co.
$14,089,165
$20,494,285
$6,405,120
45%
62
Twenty-First Century Fox, Inc.
$13,913,114
$20,315,944
$6,402,830
46%
63
Adobe Systems, Inc.
$15,787,718
$21,934,033
$6,146,315
39%
64
International Paper Co.
$13,533,664
$19,446,293
$5,912,629
44%
65
Freeport-McMoRan, Inc.
$12,531,531
$18,396,037
$5,864,506
47%
66
State Street Corp.
$13,682,022
$19,480,660
$5,798,638
42%
67
International Business Machines Corp.
$12,831,348
$18,595,350
$5,764,002
45%
68
Philip Morris International, Inc.
$13,248,958
$18,977,501
$5,728,543
43%
69
Lennar Corp.
$13,627,672
$19,127,533
$5,499,861
40%
70
Marathon Petroleum Corp.
$14,250,416
$19,670,807
$5,420,391
38%
71
Chubb Ltd.
$13,715,096
$19,116,401
$5,401,305
39%
72
Accenture Plc
$14,446,624
$19,804,109
$5,357,485
37%
73
PayPal Holdings, Inc.
$13,863,507
$19,218,634
$5,355,127
39%
74
Andeavor
$14,611,019
$19,924,675
$5,313,656
36%
75
L3 Technologies, Inc.
$14,409,456
$19,712,866
$5,303,410
37%
76
Prologis, Inc.
$14,104,820
$19,352,127
$5,247,307
37%
77
Bristol-Myers Squibb Co.
$13,528,184
$18,687,123
$5,158,939
38%
78
Microsoft Corp.
$14,865,235
$20,014,152
$5,148,917
35%
79
American Express Co.
$13,527,094
$18,611,373
$5,084,279
38%
80
Abbott Laboratories
$14,021,800
$18,971,019
$4,949,219
35%
81
McKesson Corp.
$13,297,335
$18,143,017
$4,845,682
36%
82
Hilton Worldwide Holdings, Inc.
$13,945,606
$18,790,698
$4,845,092
35%
83
The Estee Lauder Companies, Inc.
$14,293,675
$18,983,239
$4,689,564
33%
84
Humana, Inc.
$15,081,633
$19,768,523
$4,686,890
31%
85
The Allstate Corp.
$14,125,658
$18,757,329
$4,631,671
33%
86
Verizon Communications, Inc.
$13,357,976
$17,937,581
$4,579,605
34%
87
Ingersoll-Rand Plc
$14,230,375
$18,797,876
$4,567,501
32%
88
NextEra Energy, Inc.
$14,339,195
$18,811,693
$4,472,498
31%
89
Western Digital Corp.
$13,525,712
$17,907,624
$4,381,912
32%
90
Parker-Hannifin Corp.
$13,892,902
$18,238,446
$4,345,544
31%
91
Exxon Mobil Corp.
$13,147,491
$17,466,133
$4,318,642
33%
92
Sempra Energy
$13,750,499
$18,025,736
$4,275,237
31%
93
Citigroup, Inc.
$13,565,805
$17,801,683
$4,235,878
31%
94
Anadarko Petroleum Corp.
$12,880,531
$16,959,896
$4,079,365
32%
95
Procter & Gamble Co.
$13,278,709
$17,354,256
$4,075,547
31%
96
SL Green Realty Corp.
$13,399,537
$17,407,821
$4,008,284
30%
97
Merck & Co., Inc.
$13,652,007
$17,643,087
$3,991,080
29%
98
Aetna, Inc.
$14,761,034
$18,750,816
$3,989,782
27%
99
PVH Corp.
$13,298,802
$17,217,565
$3,918,763
29%
100
Wells Fargo & Co.
$13,665,517
$17,564,014
$3,898,497
29%
 

Appendix D – Financial Fund Managers’ Opposition to CEO Pay

This table summarizes more than 100 financial fund managers on their CEO pay votes at all S&P 500 companies and the 100 companies with the most overpaid CEOs.

In order not to overweight votes on securities held in many separate funds managed by a particular manager, each vote is recorded only once across that manager’s many funds. The “effective unique vote” with respect to a specific CEO pay vote is the vote cast by at least 75 percent of funds across the entire family of funds in a fund manager’s portfolio. In most instances, all funds across the portfolio will vote identically. The 75 percent threshold is applied in cases where one or more funds within the portfolio vote differently. Morningstar Fund Votes database’ Jackie Cook believes that the effective unique vote count method provides the most accurate method of analyzing a fund group’s position.

Where the 75 percent consensus threshold is not met, a “Mixed Vote” is assigned and not counted as contributing to that fund’s overall level of support for CEO pay packages included in the survey.

Highlight the titles in any column to sort numerically or alphabetically.

Fund Family
AUM In Billions
Votes Against S&P 500
Votes Against Top 100
360 Funds
NA
2%
9%
Adams Funds
0.6
0%
0%
Affiliated Managers Group
830
9%
26%
Alger Investments
21.8
16%
32%
AllianceBernstein
519
10%
36%
Allianz
598
76%
78%
Allianz Life
1960
2%
9%
Alps
18
8%
30%
American Beacon
58
3%
10%
American Century Investments
160
9%
32%
American Funds/Capital Group
1700
12%
30%
AMM
NA
10%
33%
Amplify ETFs
0.392
16%
30%
Amundi Pioneer
1708
8%
26%
AQR Capital Management
224
9%
34%
Artisan Funds
116
9%
21%
AXA
842
2%
9%
Blackrock
6440
3%
11%
Blackstone
439
9%
37%
BMO Global Asset Management
699
19%
37%
BNP Paribas Asset Management
471
34%
69%
BNY Mellon Wealth Management Family Of Funds
1868
29%
51%
Boston Trust & Walden Funds
2
8%
26%
Bridge Builder Mutual Funds
NA
3%
11%
Bridgeway Funds
8
10%
24%
Brown Advisory
49
12%
31%
Calamos Investments
20
0%
0%
Calvert
15
51%
80%
Cavanal Hill Funds
7
0%
0%
Consulting Group Capital Market Funds (Morgan Stanley)
NA
3%
11%
Claymore
NA
8%
32%
Cohen & Steers
62
5%
9%
Columbia Threadneedle
487.3
10%
32%
Commerce Funds
2.5
9%
20%
Cornerstone
16
9%
23%
Destination Funds
21.7
2%
7%
Deutsche Bank
786
10%
37%
Dimensional Fund Advisors
517
14%
47%
Direxion
11
9%
40%
Domini Impack Investments
2
78%
100%
Dreyfus Family Of Funds
200
29%
51%
Dunham Funds
1.6
8%
18%
Eagle
29
3%
13%
Eaton Vance Management
91
9%
29%
Exchange Traded Concepts
5
8%
30%
Federated Investors
255
6%
19%
Fidelity
2731
2%
7%
Fidelity (Geode)
341
10%
37%
Flexshares
14
0%
0%
Franklin Templeton
743
4%
15%
Gabelli
40
0%
1%
GE Asset Management
110
5%
12%
Glenmede
18.3
6%
25%
GMO
69
8%
29%
Goldman Sachs
1513
7%
28%
Gotham Asset Management (Fundvantage)
10
10%
36%
Great-West Funds
43
6%
24%
Green Century Funds
1
85%
80%
Guggenheim
16
10%
36%
Guidemark
30.06
6%
26%
Guidestone Funds
20.51
7%
20%
Harbor Funds
58
7%
27%
Hartford Funds
102
4%
15%
Hennessy Funds
7
0%
0%
Highland Funds
21
11%
30%
Homestead Funds
2
3%
8%
Horizon Funds
3
0%
1%
Horizons ETF
0.279
9%
29%
Icon Advisors
2
10%
27%
Invesco
472
8%
26%
Ivy Investments
62
5%
19%
Jackson
34
9%
19%
James Advantage Funds
5.2
8%
22%
Janus Henderson Investors
180
7%
25%
John Hancock Investments
393
5%
21%
JP Morgan Funds
1710
6%
18%
Lattice Strategies
0.405
27%
49%
Lazard Asset Management
164
5%
15%
Legg Mason
747
7%
26%
Liberty Funds Group
142
9%
28%
LKCM Funds
16.3
15%
30%
Loomis Sayles
267
13%
23%
Lord Abbett
169
2%
7%
Macquarie Delaware
496
7%
24%
MainStay Funds
21.73
8%
32%
MassMutual Funds
29
1%
3%
Meeder Funds
2
10%
36%
Mercer Funds
46
6%
22%
MFS
378
8%
25%
Morgan Stanley Investment Funds
447
11%
33%
Mutual Of America
17
10%
36%
Nationwide
82
1%
7%
Natixis Funds
1008
44%
46%
Neuberger Berman
248
7%
19%
New Covenant Funds
NA
8%
21%
Northern Trust
1200
0%
0%
Northwestern Mutual
NA
7%
26%
Nuveen
174
8%
32%
Ohio National Fund
42
0%
0%
Old Westbury Funds
34.6
11%
34%
Olstein Funds
1
10%
29%
Oppenheimer Funds
213
10%
35%
Pacer Funds
2
9%
30%
Pacific (Pacific Life)
54
2%
8%
Pax World Funds 
16.3
39%
59%
Penn Mutual
20
2%
11%
PGGM
252
98%
98%
PIMCO
1710
18%
49%
PNC Funds
52
7%
27%
Praxis Mutual Funds
1.3
14%
37%
Primecap Odyssey Funds
135
0%
0%
Principal Funds
692
7%
29%
Pro Funds
5
10%
37%
ProShares
29
10%
37%
Prudential Global Investment Management (PGIM)
846
3%
10%
Putnam Investments 
92
9%
18%
Quaker Funds
2
3%
9%
Quantshares/AGFiQ
0.811
8%
28%
Reynolds Investments
0.079
0%
0%
Royal London Asset Management
153
71%
89%
Russell
287
13%
35%
Rydex (Guggenheim)
16.4
10%
37%
Schroders
593
35%
63%
Schwab Funds
302.3
4%
19%
SEI
192
10%
31%
Securian Funds Trust (SFT) Advantus
41.5
6%
19%
Sit Mutual Funds
4
6%
16%
State Farm
22
3%
10%
State Street/SSGA Funds
2700
4%
16%
State Street (Elfun)
2700
4%
15%
Sterling Capital Funds
58
10%
26%
Steward Funds
5.1
0%
0%
Stone Ridge Funds
16.3
8%
31%
SunAmerica
75
10%
36%
T. Rowe Price
1100
5%
18%
TCW Funds
39
3%
5%
TD Ameritrade
355
7%
27%
Thrivent Mutual Funds
109
9%
32%
TIAA-CREF
241
4%
12%
TIFF Investment Management
10
9%
33%
Tocqueville Funds
12.68
12%
42%
Touchstone Investments
19.11
6%
17%
Transamerica
83.99
2%
11%
UBS Funds
653
7%
18%
Ultimus Fund Solutions
150
5%
18%
US Bancorp Fund Services
1140
10%
35%
US Capital Advisors
5
9%
7%
USAA Mutual Funds
155.4
10%
37%
VALIC Funds
18.97
9%
35%
Value Line Funds
NA
13%
29%
VanEck
43
7%
31%
Vanguard
4839
3%
14%
Victory Capital
64
10%
37%
Virtus Investment Partners
30
8%
29%
Voya Investment Management
219
5%
21%
Wells Fargo Funds
473
9%
35%
Wilmington Funds
20
10%
36%
Wilshire Mutual Funds
NA
7%
23%
WisdomTree
46.6
29%
50%
 

Appendix E – Pension Fund Opposition to CEO Pay

Data provided by Proxy Insight.

Highlight the titles in any column to sort numerically or alphabetically.

Fund Name
AUM In Billions
Percent Against S&P 500
Percent Against Top 100
Achmea
136
69%
83%
ACT Government (Australia)
3
10%
40%
Alameda County Employees' Retirement Association
6
11%
36%
Alaska Retirement Management Board
27
10%
35%
Alberta Investment Management Corporation (AIMco)
78
13%
32%
Arizona State Retirement System
38
9%
30%
Australia Post Super
0
2%
5%
bpfBOUW (De Stichting Bedrijfstakpensioenfonds voor de Bouwnijverheid)
57
54%
69%
BPL Pensioen
16
86%
88%
British Columbia Investment Management Corporation (BCI)
101
32%
62%
Caisse de dépôt et placement du Québec
308
19%
41%
California Public Employees’ Retirement System (CalPERS)
323
45%
74%
California State Teachers' Retirement System (CalSTRS)
221
12%
40%
Canada Pension Plan Investment Board (CPPIB)
248
10%
38%
City of Philadelphia Board of Pensions and Retirement
4
45%
69%
Colorado Fire & Police Pension Association (FPPA)
2
23%
57%
Colorado PERA
55
8%
28%
Employees' Retirement System of Georgia (ERS)
0
0%
2%
Employees Retirement System of Texas
29
11%
41%
EnergySuper
5
7%
14%
Florida State Board of Administration 
202
54%
80%
Hermes
47
61%
75%
Illinois Municipal Retirement Fund
41
10%
35%
Illinois State Board of Investment
15
9%
31%
Intrust Super Fund
1
12%
26%
Kentucky Teachers' Retirement System
16
9%
34%
Local Government Superannuation Scheme
7
10%
28%
Los Angeles City Employees’ Retirement System (LACERS)
43
9%
35%
Los Angeles County Employees Retirement Association (LACERA)
56
13%
42%
Los Angeles Fire & Police Pensions
21
9%
29%
Loyola University of Chicago
2
15%
28%
Maine PERS
14
9%
31%
Maryland State Retirement and Pension System
43
10%
36%
Massachusetts Pension Reserves Investment Management (PRIM)
66
23%
56%
Minnesota State Board of Investment
93
77%
92%
MN
146
100%
100%
New Hampshire Retirement System
8
10%
36%
New Mexico Educational Retirement Board
12
10%
36%
New York City Pension Funds
197
19%
54%
New York State Common Retirement Funds
192
26%
53%
New York State Teachers' Retirement System
113
9%
31%
Norges Bank Investment Management
1301
8%
32%
North Carolina Department of State Treasurer
94
8%
26%
Northern Ireland Local Government Officers Superannuation Committee
9
99%
100%
Ohio Public Employees Retirement System (OPERS)
86
21%
44%
Ohio School Employees Retirement System (SERS)
13
20%
52%
Ontario Municipal Employees Retirement System (OMERS)
95
5%
18%
Ontario Public Service Employees' Union (OPSEU) Pension Trust (OPTrust)
19
9%
33%
Ontario Teachers' Pension Plan (OTPP)
141
18%
35%
Oregon Investment Council
77
9%
30%
Pennsylvania State Employees' Retirement System (SERS)
28
8%
29%
Pensioenfonds Vervoer
26
8%
27%
Pensionfund Metalektro (PME)
53
100%
100%
Pensionskasse SBB
16
12%
27%
PGGM Investments
251
98%
97%
PSP Investments
105
11%
35%
Retail Employees Superannuation
35
9%
16%
State of Connecticut Retirement Plans & Trust Funds
32
15%
44%
State of Rhode Island
8
14%
36%
State of Wisconsin Investment Board (SWIB)
111
12%
39%
Teacher Retirement System of Texas
165
10%
36%
Texas Education Agency
37
10%
34%
Unipension Fondsmaeglerselskab
0
59%
71%
University of California
107
14%
38%
Vermont Pension Investment Committee
4
24%
56%
Virginia Retirement System
67
NA
28%
Vision Super
6
10%
29%
Washington State Investment Board (WSIB)
116
9%
30%
 

Appendix F – Most Overpaid CEOs Under-Perform Financially

By HIP Investor (Onindo Khan, Erik Nielsen and R. Paul Herman)

FIGURE 1: OVERPAID CEOS UNDERPERFORM FINANCIALLY

Total Shareholder Return (TSR), annualized 3 years and 3.84 years
(Before: Feb. 28, 2012 to Feb. 28, 2015; After: Feb. 28, 2015 to Dec. 31, 2018)

Appendix_F1.PNG

The S&P 500 companies continue to boost CEO pay, the average CEO now gets almost 300 times the median worker’s pay, and the average Overpaid CEOs get 460 times the average worker pay – and the most overpaid CEO collects more than 3,000 times the median worker pay.

While defenders of high CEO pay contend that the rewards are for increased shareholder value, the truth is clear: shareholders of companies with most overpaid CEOs typically underperform the stock market.

The first edition of As You Sow’s Most Overpaid CEOs report, published in 2015, identified the 100 firms significantly overpaying their chief executives. Advocates of high CEO pay contend that pay was high at these companies as a reward for high shareholder returns. However, as seen in Figure 1, the average annual total shareholder returns in the three years prior (Feb. 28, 2012 to Feb. 28, 2015) to a high pay package was essentially the same as it was at companies without the same levels of excess pay. Then, in the nearly four years since (Feb. 28, 2015 to Dec. 31, 2018), the group of companies with the most overpaid CEOs underperformed the S&P500. If savvy investors sold, shorted, or underweighted the 100 most overpaid firms, they would have earned more than the stock market average.

When we look at the quantitative evidence, pay for performance is a myth.embarrassingly negative -15.6%. – and this even in one of the longest bull markets in history.

FIGURE 2: MOST QUARTILES ANDDECILE OF OVERPAID CEOS LAG THE MARKET

Appendix_F2.PNG

Total Shareholder Return (TSR), annualized 3 years and 3.84 years
(Before: Feb. 28, 2012 to Feb. 28, 2015; After: Feb. 28, 2015 to Dec. 31, 2018)

Our HIP Investor team analyzed multiple financial indicators over different timeframes for all S&P 500 companies and consistently found extremely low correlations (single digit correlation coefficients) between CEO pay and historical financial performance — whether one-, three- or five-year performance for financial ratios including Return on Invested Capital (ROIC), and Total Shareholder Return (TSR) including capital gains and reinvested dividends.

Unbundling the most overpaid 100 into the worst decile of 10 firms, the remainder of the worst quartile, and the remaining three quartiles, all segments underperformed the S&P 500 market average. Again, this year, the worst 10 firms with massively overpaid CEOs destroyed shareholder value, losing money for investors — and dramatically lagging the market by an embarrassingly negative — 14 percentage points.

The year 2018 has brought a massive change. Sustainable businesses are under attack by the current administration, tax breaks and favoritism have warped the relation between shareholder returns and actual future risk, and the market experienced a sharp downturn in late 2018 — the biggest since the 2008 global financial crisis.

FIGURE 3: 2015 OVERPAID CEOS POSTING BIGGER LOSS IN 2018

Appendix_F3.PNG

1-Year Total shareholder Return (TSR)
from Dec. 31, 2017 to Dec. 31, 2018 of the 2015 Overpaid CEOs list

Still the 2015 Top 100 consistently underperformed this year. This overpaid group lost a full -11.3%, underperforming the S&P 500 by -3.6 percentage points. (Chart to left.)

However, we noticed that the more recent lists, especially the 2018 list, do not follow this trend. We actually see that the 2018 Top 100 outperformed the S&P 500 by 1.2 percentage points, still posting a big loss at 6%. This Trump-driven turnabout could be witnessed throughout the financial markets. Oil and Gas firms resurged, and tax cuts benefitted most large corporations. (Chart below.)

FIGURE 4: 2018 OVERPAID CEOS SLIGHTLY OUTPERFORM

1-Year Total shareholder Return (TSR)
from Dec. 31, 2017 to Dec. 31, 2018 of the 2018 Overpaid CEOs list

Appendix_F4.PNG

The trend we are observing here is only visible over the short one-year period. With a changing political landscape and transformation in fund voting behavior, as investors, we should heed the recommendations for reasonable CEO pay in our investment decisions: Long-term incentives that reduce future risk and enhance future value, while also cultivating future talent, yield firms which are more sustainable and can achieve long-term financial growth and resilience.

Your portfolio is your money. The companies and funds you invest in should be listening to you. However, the most overpaid CEO pay packages are approved by boards, elected by you the investor, and the mutual funds who hold their stocks. We encourage you as investors to speak up, vote your “say-on-pay,” and pressure the companies and funds in your portfolio with this evidence — which can benefit your long-term financial performance and a more appropriate level of rewards for results achieved.

 

  1. "Companies Shift CEO Pay Mix Following Multiple Say on Pay Failures” Equilar, 4 Feb. 2019. 
    https://www.equilar.com/blogs/411-ceo-compensation-and-say-on-pay.html.

  2. Mishel, Lawrence and Schieder, Jessica. CEO compensation surged in 2017. Washington.: Economic Policy Institute. 2018. Web.
    https://www.epi.org/publication/ceo-compensation-surged-in-2017/.

  3. Burckart, William; Clark, Mackenzie; Lydenberg, Steve, and Musuraca, Michael. Why and how investors can respond to income inequality. London: United Nations Principles for Responsible Investment. 2018. Web. 
    https://www.unpri.org/download?ac=5599, 6.

  4. Kaissar, Nir. “CEO Pay is an Underrated Risk to Stocks.” Bloomberg 1 Feb. 2019. Web.

  5. Bebchuk, Lucian A. and Hirst, Scott. “Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy.” ECGI – Law Working Paper. 433 (2018): 3. SSRN. Web. 
    https://ssrn.com/abstract=3282794.

  6. Proxy Insight. “Letter to Brent J. Fields, Re: File Number 4-725 Submission in advance of Staff Roundtable on the Proxy Process.” Sec.gov/comments. Securities and Exchange Commission, 13 Nov. 2018. Web. 
    https://www.sec.gov/comments/4-725/4725-4636546-176444.pdf.

  7. Institutional Shareholder Services. “U.S. Compensation Policies Frequently Asked Questions.” Issgovernance.com. Institutional Shareholder Services, 20 Dec. 2018. Web. 
    https://www.issgovernance.com/file/policy/latest/americas/US-Compensation-Policies-FAQ.pdf.

  8. Glass Lewis. “Glass Lewis Guidelines: An Overview of the Glass Lewis Approach to Proxy Advice.” Glasslewis.com. Glass Lewis, 2019. Web.
    http://www.glasslewis.com/wp-content/uploads/2018/10/2019_GUIDELINES_UnitedStates.pdf
     (p. 35)

  9. Bebchuk & Hirst. “Index Funds,” 15.

  10. Wartzman, Rick. “When it comes to investment giants furthering social good, many see a disconnect between words and action.” Fast Company 30 Jan. 2019. Web. 
    https://www.fastcompany.com/90298578/when-it-comes-to-investment-giants-furthering-social-good-many-see-a-disconnect-between-words-andaction.

  11. Bebchuk & Hirst. “Index Funds,” 3.

  12. Jahnke, Patrick. “Asset Manager Stewardship and the Tension Between Fiduciary Duty and Social License.” (2019): 4. SSRN. Web.
    https://ssrn.com/abstract=3307172 or http://dx.doi.org/10.2139/ssrn.3307172.

  13. Gilshan, Deborah. Global ESG Investments, Quarter 3, 2018 – Report of Activities. Aberdeen: Aberdeen Standard Investments. 2018. Web.
    https://www.aberdeenstandard.com/docs?editionId=d6554a67-91be-4125-b1d3-515ca5db0ab2 (Royal Mail p. 24).

  14. All votes reported cover the time period from Jul. 1, 2017 to Jun. 30, 2018. The percentages are calculated based on the equities voted within the S&P 500 and the list of 100 Overpaid CEOs. Those funds that voted on fewer than 25 of these companies are generally not included in this study.

  15. AllianzGI. “Global Corporate Governance Guidelines.” allianzgi.com. AllianzGI, May 2018. Web.
    https://us.allianzgi.com/-/media/allianzgi/na/us/documents/2017/06/13/19/16/global-corporate-governance-guidelines-and-proxy-voting-policy.pdf.

  16. BlackRock. “BlackRock Investment Stewardship Engagement Priorities for 2018.” Blackrock.com. BlackRock, March 2018.
    https://www.blackrock.com/corporate/literature/publication/blk-stewardship-2018-priorities-final.pdf.

  17. State Street Global Advisors. “Transparency in Pay Evaluation: Adoption of Abstain as a Vote Option on Management Compensation Resolutions.” Ssga.com. State
    Street Global Advisors, April 2018. Web. https://www.ssga.com/investment-topics/environmental-social-governance/2018/05/rtl-transparency-in-payevaluation.pdf.

  18. Letts, Andrew. “Engaging with Rakhi Kumar of State Street Global Advisors.” Corpgov.law.harvard.edu. Harvard Law School Forum on Corporate Governance and
    Regulation, 11 Sep. 2018. Web. https://corpgov.law.harvard.edu/2018/09/11/engaging-with-rakhi-kumar-of-state-street-global-advisors/.

  19. Stewardship 2017. Boston: State Street Global Advisors. 2017. Web.
    https://www.ssga.com/investment-topics/environmental-social-governance/2018/07/annual-stewardship-report-2017.pdf (p. 2).

  20. Bogle, John. “Reflections on CEO Compensation.” Academy of Management Perspectives (2008): 21. Web.
    http://webuser.bus.umich.edu/jpwalsh/PDFs/Bogle%20-%202008%20-%20Reflections%20on%20CEO%20compensation%20--
    %20AMP%20paper.pdf
    .

  21. 2018 Investment Stewardship Annual Report. Valley Forge: Vanguard. 2018. Web.
    https://about.vanguard.com/investment-stewardship/perspectives-and-commentary/2018_investment_stewardship_annual_report.pdf.

  22. “Green Century Capital Management Proxy Voting Policies and Procedures.” Proxyinsight.com. Green Century Capital Management, Inc., 22 Nov. 2018. Web.
    https://www.proxyinsight.com/members/Investor_DOCs/Green%20Century%20Capital%20Management%20Voting%20Policy%202018%20SAI.pdf (p. 171).

  23. Jacobius, Arleen. “CalPERS turns focus to board diversity in proxy voting.” Pension and Investments 17 Sep. 2018. Web.
    https://www.pionline.com/article/20180917/ONLINE/180919861/calpers-turns-focus-to-board-diversity-in-proxy-voting.

  24. Diamond, Randy. “CalPERS Rejects Pay Packages for 43% of US Companies.” Chief Investment Officer 18 Sep. 2018. Web.
    https://www.ai-cio.com/news/calpers-rejects-pay-packages-43-us-companies/.

  25. Zdrazil, Scott. “Memorandum: Review of FY2018 Proxy Voting Results and Trends.” Lacera.com. Los Angeles County Employees Retirement Association, 10 Oct.
    2018. Web. Accessed Day Month Year. https://www.lacera.com/about_lacera/boi/meetings/corp_gov/2018-10-10_corp_gov_agnd.pdf.

  26. Los Angeles County Employees Retirement Association. “Corporate Governance Principles.” Lacera.com. Los Angeles County Employees Retirement Association,
    February 2018. Web. https://www.lacera.com/BoardResourcesWebSite/BoardOrientationPdf/policies/CorpGovPrinciples.pdf.

  27. “DiNapoli and NY State Pension Fund Reach Agreements with Major Companies on Executive Pay.” osc.state.ny.us. Office of New York State Comptroller, 21 Dec.
    2018. Web. https://www.osc.state.ny.us/press/releases/dec18/122118.htm.

  28. Lally, Rosemary. “As You Sow Uncovers ISS Error.” Council of Institutional Investors Governance Alert 2 Aug. 2018. Web.

  29. “Shareholder Engagement and Proxy Voting.” Investments.treasury.ri.gov. State of Rhode Island, State Investment Information Center, n.d. Web.
    http://investments.treasury.ri.gov/meetings-reports/proxy-voting/.

  30. Rhode Island Office of the General Treasurer. “Proxy Voting Guidelines.” Investments.treasurey.ri.gov. N.p, 16 Sep. 2018. Web.
    https://d10k7k7mywg42z.cloudfront.net/assets/5c08053023f8124fa8129f50/Existing_Rhode_Island.pdf.

  31. Proxy Insight Website, https://www.proxyinsight.com/members/FMProfile.aspx?cmpid=2319 –.

  32. Comprehensive Annual Financial Report. Jefferson City: Public School & Education Employee Retirement Systems of Missouri. 2017.
    https://www.psrs-peers.org/docs/default-source/Investments-Documents/2017-CAFR/CAFR-2017-Intro.pdf?sfvrsn=1311470d_6.

  33. Duarte, Fernando. “It takes a CEO days to earn your annual wage.” BBC 9 Jan. 2019. Web.
    http://www.bbc.com/capital/story/20190108-how-long-it-takes-a-ceo-to-earn-more-than-you-do-in-a-year?ocid=ww.social.link.twitter.

  34. Burckart, Clark, Lydenberg, and Musuraca. “Why and How,” 30.

  35. Anderson, Sara, and Pizzigati, Sam. “When Corporations Pay CEOs Way More Than Employees, Make Them Pay!” The Nation 17 Jan. 2019. Web.
    https://www.thenation.com/article/inequality-tax-poverty-billionaire/.

  36. Burckart, Clark, Lydenberg, and Musuraca. “Why and How,”,31.

  37. Burckart, Clark, Lydenberg, and Musuraca. “Why and How,”,31
 
 

Rosanna Landis Weaver, Program Manager, Power of the Proxy: Executive Compensation, As You Sow

This is the fifth The 100 Most Overpaid CEOs of the S&P 500: Are Fund Managers Asleep at the Wheel? report that Rosanna Landis Weaver has written for As You Sow. Weaver began her corporate governance career with a position in the corporate affairs office at the International Brotherhood of Teamsters in 1992, supervising research on corporate governance. In 1999 she joined the Investor Responsibility Research Center (IRRC) and served as an expert on labor shareholder activism, writing reports on compensation-related shareholder proposals and golden parachutes. At Institutional Shareholder Services (ISS), which she joined in 2005, she was a senior analyst on the executive compensation team, with a particular focus on change of control packages, and analyzed Say-on-Pay resolutions. From 2010 to 2012, she was the governance initiatives coordinator at Change to Win. Weaver holds a bachelor’s degree in English from Goshen College and a master’s in American Studies from the University of Notre Dame.

 

ACKNOWLEDGEMENTS

This report was made possible by the generous support of the Stephen M. Silberstein Foundation. Additional support was provided by the Arkay Foundation, the Arntz Family Foundation, the Keith Campbell Foundation for the Environment, the Firedoll Foundation, the Hanley Foundation, the Libra Foundation, the Manaaki Foundation, the New Belgium Family Foundation, the Roddenberry Family Foundation, the Roy and Patricia Disney Family Foundation, and the Singing Field Foundation.

Special thanks to:

  • The Proxy Insight database was invaluable and Seth Duppstadt and Sophie Miles were prompt and patient with answering specific questions. It is due to their research that we were able to vastly expand the number of funds covered in the report.

  • The Human Impact + Profit (HIP) Investor team conducted the regression analysis, upon which a key component of this report rests. HIP, founded in 2006, rates 121,000 investments on all aspects of sustainability (including corporate CEO pay) and how it correlates to future risk and return potential. Onindo Khan, vice president, impact analytics, and R. Paul Herman, HIP’s CEO and professor of sustainable finance at Presidio Graduate School, were extraordinarily helpful and

    responsive throughout the process.

  • Much of the mutual fund voting analysis was based on data provided by Morningstar®, which acquired Fund Votes Research in September 2018.

  • Don Montuori served as an editorial consultant on this project. His fresh eyes, insight, and attention to detail were extremely valuable.

  • Robert Reich has been a cogent advocate for reasonable executive compensation and economic justice for decades and generously joined us as a panelist for our release webinar.

  • The As You Sow team; (alphabetically by last name) Andrew Behar, Sharon Cho, Jill Courtenay, Sarah Milne, and Stefanie Spear. Thanks also to the digital design team Alison Kendrick and Edward Melville, the copy editor Tami Holzman, and John Opet of Art270.

 

Disclaimer

The aggregated information comprising The Most Overpaid CEOs 2018 represents a snapshot in time of publicly available information regarding shareholder voting with U.S. public companies.

The information provided in The Most Overpaid CEOs 2019 is provided “AS IS” without warranty of any kind. As You Sow makes no representations and provides no warranties regarding any information or opinions provided herein, including, but not limited to, the advisability of investing in any particular company or investment fund or other vehicle. While we have obtained information believed to be objectively reliable, As You Sow or any of its employees, officers, directors, trustees, or agents, shall not be responsible or liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with use of or reliance on any information contained herein, including, but not limited to, lost profits or punitive or consequential damages. Past performance is not indicative of future returns.

As You Sow does not provide investment, financial planning, legal, or tax advice. We are neither licensed nor qualified to provide any such advice. The content of our programming, publications, and presentations is provided for informational and educational purposes only and should not be considered as information sufficient upon which to base any decisions on investing, purchases, sales, trades, or any other investment transactions. We do not express an opinion on the future or expected value of any security or other interest and do not explicitly or implicitly recommend or suggest an investment strategy of any kind.

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