As a rule, the companies that appear on As You Sow’s annual Most Overpaid CEOs list—always some of the biggest in the corporate world—have provided less-than-amazing returns on their investments.
In fact, the investor advocacy group says that since the first list was published in 2015, a hypothetical rolling portfolio of each new year’s 100 most overpaying companies would have performed 20% worse than if you’d simply invested in an index fund that matched the S&P 500 average. This suggests that maybe overpaying the boss isn’t the most winning business strategy.
However, the group’s report for 2021 is out today, and it observes that last year’s median CEO pay package for S&P 500 and Russell 3000 companies reached yet another all-time high, even though many of these companies froze or reduced base salaries in response to the pandemic.
But the point of As You Sow’s annual report has never really been to point out that CEOs earn a lot. (The top ones now make 350 times more than the typical worker.) Rather, it’s to track how their pay is becoming increasingly untethered from company performance. To calculate that, the group looks at factors like the percent of shareholders who voted against a CEO’s pay package, how much that CEO’s pay outpaces their company’s performance, and the ratio of the CEO’s pay compared to their average worker’s. (Making a bazillion dollars isn’t, by itself, enough—or else Elon Musk would be No. 1.)
Using these criteria, As You Sow says these are 2021’s top 10 most overpaid executives:
- Chad Richison, of Paycom Software
- Frank Del Rio, of Norwegian Cruise Line
- Lawrence Culp Jr., of General Electric
- Mike Sievert, of T-Mobile
- John Donahoe, of Nike
- Chris Nassetta, of Hilton
- John Plant, of Howmet Aerospace
- David Zaslav, of Discovery
- Brian Niccol, of Chipotle Mexican Grill
- Leonard Schleifer, of Regeneron Pharmaceuticals
The above CEOs had generous paydays in 2021. But the report’s authors note that last year was also unique. There was investor backlash to excessively high executive pay packages: Shareholders rejected a record 16 different CEO pay packages, and the authors say if you look only at normal institutional shareholders, the number of packages rejected climbs even higher—to 29, double last year’s total.
But this backlash seems driven more by the fear that companies were using questionable metrics to set CEO pay, they say, than the fact that compensation is stratospheric. Many of the companies that got dinged by shareholders were the ones that tried to use COVID-19 to justify changing their CEO pay-performance metrics.
“There’s never been a year with this number of high opposition votes against pay in the eight years of this report,” says Rosanna Landis Weaver, the report’s lead author. “Some boards acted as if pay for performance didn’t matter when COVID-19 was involved, and shareholders angrily rejected those packages.” But As You Sow argues that it’s time for more shareholders to reject excessive executive compensation simply because it’s “not in the best interests of shareholders,” and perhaps also immoral.
You can check out the full report here.