In response to John Simon's excellent article in today's Wall Street Journal on "Shareholder Value" and CEO pay:
http://www.wsj.com/articles/the-two-words-that-earn-ceos-a-pay-raise-1478622713
Here is a different take on the same subject.
The correlation
between a company’s percent change in outstanding shares from 2008-15 and
the rank of the CEO’s pay[1]
in 2015 was found to be -.18 in a sample of 100 S&P equities.
The reduction
in shares outstanding leads to an increase in Earnings per Share but not in Net
Profit. The correlation between the rank
in change in shares outstanding and the rank of EPS - Net Profit growth is .88.
The conclusion
therefore is that there is a tendency to pay CEO’s more for the illusion of
growth rather than growth itself.
©2016 Robert
L. Colby corequity@blogspot.com
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