Overpaid CEOs: Rational Apathy at Investment Funds
Below are a few highlights from their press release and executive summary:
” CEO pay grew an astounding 997% over the past 36 years, greatly outpacing the growth in the cost of living, the productivity of the economy, and the stock market, disproving the claim that the growth in CEO pay reflects the “performance” of the company, the value of its stock, or the ability of the CEO to do anything but disproportionately raise the amount of his or her pay.
In the last year, pay for S&P 500 CEOs has risen (by some estimates up to 15.6%), yet the value of the shares of these companies actually declined slightly- despite massive expenditures of corporate funds on stock buybacks designed to increase the value of those shares. After five years of delay the SEC finally adopted rules that will allow shareholders to better understand the gap between the pay of the CEO and other employees of the corporation. The SEC is also moving forward on rules that will help expose the gap between the pay of the CEO and the performance of the companies’ shares in the stock market. Furthermore, some mutual funds and pension funds began to better exercise their fiduciary responsibility by more frequently voting down some of the most outrageous CEO pay packages.
Today more and more investors own shares through mutual funds, often investing in S&P 500 index funds. Individual investors are not in a position to sell their stakes in a company. The funds themselves are subject to a number of well-documented conflicts of interest and to what economists refer to with the oxymoronic-sounding term “rational apathy,” to reflect the expense of oversight in comparison to a pro rata share of any benefits.”
Most of us learn as children that government is supposed to protect us. While the armed forces have done a good job at keeping us safe from foreign invaders, our political system seems broken. Corporations are increasingly at the real the center of power… writing our laws and playing one country off against another with regard to taxes and regulatory environment. …………..”
Source: Corpgov.net – http://www.corpgov.net/2016/02/the-100-most-overpaid-ceos-take-action/
The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.