Assessing Pay for Performance
In a Conference Board Director Note, Steve O’Byrne shows how to use historical pay data to measure three basic dimensions of pay for performance: pay leverage to relative TSR, pay alignment with relative TSR and pay premium at industry average performance. The analysis is based on three year “mark to market” pay so it captures the incentive provided by unvested equity compensation. For the median S&P 1500 company, a 10% increase in relative shareholder wealth increases relative pay by 5.5% and relative performance explains a third of the variation in relative pay over the last 10+ years.
What
Investors Need to Know about Executive Pay
In
a Journal of Investing article on "What Investors Need to
Know about Executive Pay" Steve O'Byrne and David Young show how
investors can calculate comprehensive measures of top management's incentive
to increase shareholder value and its incentive for value-less revenue
growth. They explain the flaws of the conventional approach to executive
pay and present their research on the impact of top management "wealth
leverage" on company performance.
Listen
to O’Byrne’s 5 minute video summary on the Journal of Investing website (click tab #2 on the lower right of the video panel in the center
of the Journal’s web page).
The Impact of Top Management Incentives on Corporate
Performance
In a Journal of Applied Corporate Finance article, Steve O’Byrne and David Young explain the concept of wealth leverage, show how compensation practices affect wealth leverage and present research on the impact of wealth leverage on company performance.
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