Investors Supporting Overpaid CEOs – And Paying the Price

Your returns are likely to be affected when management salaries are too high, new report finds.  

Ruth Saldanha 25 February, 2022 | 4:48AM
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Yesterday, shareholder advocacy group As You Sow released its annual report “The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?”. The report analyses how pension and financial fund managers vote on the pay of the 100 most overpaid CEOs in the U.S – and there have been raises…

CEO Pay is Increasing

In 2021, CEO pay levels reached record levels, despite widespread salary freezes and reductions, according to Institutional Shareholder Services, that noted that continuing CEOs in the S&P 500, as well as the Russell 3000, saw overall pay increases that were primarily due to larger long-term equity incentives, and the median CEO pay package was at an all-time high in both indices, even though many companies froze or reduced base salaries in response to the coronavirus pandemic.

This is not the first time this has happened. “CEO pay has continued to rise from year to year. In 2020 many boards passed adjustments to shield executives from anticipated coronavirus-related market declines, resulting in windfall CEO paychecks as markets defied pandemic restrictions. CEO pay averaged $15.3 million across S&P 500 companies or 291 times that of the median worker,” noted Jackie Cook, Director of Stewardship in Sustainalytics' Stewardship Services Team, managing the ESG Voting Policy Overlay service.

Which are these companies? To identify the 100 Most Overpaid CEOs, As You Sow evaluated the CEO pay at S&P 500 companies using data provided by ISS. Further data and analysis provided by HIP Investor computed what the pay of the CEO would be, assuming such pay is related to cumulative Total Shareholder Return (TSR) over the previous five years, using a statistical regression model. This provided a formula to calculate the amount of excess pay each CEO receives. Here are the 10 most overpaid CEOs:




Excess CEO Pay

CEO to Worker Pay Ratio

Paycom Software

Chad Richardson




Norwegian Cruise Lines

Frank Del Rio.




General Electric

H. Lawrence Culp Jr.





G. Michael Sievert





John J. Donahoe II




Hilton Worldwide Holdings

Christopher J. Nassetta




Howmet Aerospace

John C. Plant





David M. Zaslav




Chipotle Mexican Grill

Brian R. Niccol




Regeneron Pharmaceuticals

Leonard S. Schleifer




Source: As You Sow

Shareholders Pay the Price

These pay hikes can have negative impacts on shareholders. As You Sow finds that the companies with the most overpaid CEOs have had lower returns to shareholders than the average S&P 500 company. “Cumulating these underperformances over all seven years of this report series, a rolling portfolio of the most 100 overpaying companies each year would have returned a full 20 percentage points less than the S&P 500 average,” the report says. 

“The primary driver of CEO pay growth is equity-based incentive compensation: options, restricted stock, and performance shares. The conventional view is that equity-based pay binds CEOs’ fortunes with those of stockholders. However, complex pay structures obscure this connection from the ordinary investor. Furthermore, as markets have risen, so have senior executive and CEO pay—regardless of the relative competence of CEOs and senior management teams in securing long-term shareholder value,” Cook notes.

Say-On-Pay – A Tool for Investors

Say-on-pay is a management-proposed ballot measure that gives shareholders a nonbinding proxy vote on executive compensation practices. It was mandated for U.S. public issuers by the 2010 Dodd-Frank Act which intended to correct market failures leading to the 2008 global financial crisis, primarily that financial industry incentive pay practices rewarded excessive risk-taking over long-term value creation.

According to As You Sow, 2021 showed substantial increases in opposition to CEO pay packages. “A record 16 companies had CEO pay packages rejected by more than half of the shareholders, a 60% increase from the ten in 2020 and more than double the seven in 2019. The number of CEO pay packages that were rejected by more than a majority of institutionally held shares was 29, almost twice the 15 we saw last year,” the report says, adding that the increase in opposition seems to be based on more companies employing questionable practices and metrics in setting CEO pay, and not the total amount of pay.

“The say-on-pay vote was intended to give all investors more of a voice in pay setting practices and, at the time, was expected to remedy the widely recognized problem of outsize CEO pay. Unfortunately, say-on-pay has failed,” contends Cook.

“In 2021, investors stepped up votes against large companies' pay practices, but only a little. Average support for say-on-pay dropped 1.2 percentage points to 88.4%, marking a record low and extending a four-year incremental decline,” she said.

This could be because of how large asset managers are voting.

What the Proxy Advisors Say

Many investors follow recommendations by proxy advisors. The firms either recommend ‘For’ or ‘Against’ or ‘Abstain’ on various proposals, including say-on-pay. Here is a list of ‘Against’ recommendations on say-on-pay by leading proxy advise firms:

Proxy Firm Name

S&P 500 ‘Against’ Recommendation (%)

100 Most Overpaid CEO ‘Against’ Recommendation (%)




Glass Lewis



Segal Marco









Source: As You Sow

Assuming that asset managers voted per these recommendations, a majority of the executive compensation packages would have been rejected. This was not the case.

How Asset Managers Voted

This could be due to how major asset managers voted.

“The big three financial managers – BlackRock, Vanguard, and SSgA – who together control about 20% of all shareholder votes are still approving about 95% of S&P 500 CEO pay packages,” As You Sow notes, adding that the number of rejections is far from what it should be. Here is how asset managers with over US$2,000 bn in assets under management voted on say-on-pay:

Asset Manager

S&P 500 ‘Against’ Vote (%)

100 Most Overpaid CEO ‘Against’ Vote (%)




Vanguard Group



Fidelity Management & Research Company



SSgA Funds Management



J.P. Morgan Investment Management



Capital Group



Goldman Sachs Asset Management






Source: As You Sow

“While we have seen a growing rejection of CEO pay packages from many of the largest mutual funds and pension funds, change has been unconscionably slow. This pay growth is both unjustified and decidedly not in the best interest of shareholders,” the report concludes.


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Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Follow her on Twitter @KarishmaRuth.


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