Median pay for CEOs of big U.S. companies rises to new high in 2018: report

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WASHINGTON, May 17 (Xinhua) -- The median pay for CEOs of big U.S. companies rose to 12.4 million U.S. dollars in 2018, setting the post-recession record for the fourth consecutive year, according to a report by The Wall Street Journal on Friday citing its own analysis.

While the 2018 median pay for bosses of S&P 500 companies was up 6.6 percent from that of 2017, the median shareholder return for those companies last year was minus 5.8 percent, the worst reading since the 2008 financial crisis, the report said.

The Journal said the increase in CEOs' earnings vis-a-vis the negative stock-market returns for the companies' shareholders is "a sign of the often-weak relationship between pay and performance."

The report further explained that the discrepancy raises doubts about whether big corporations have successfully tied executive pay to company performance. The "execution and complexity" of the pay rise mechanisms that the companies have adopted is where the fault lies, it added.

The highest-paid executive was David Zaslav, CEO of Discovery Inc. Zaslav's pay tripled to 129 million dollars in 2018 thanks to "a substantial increase in stock-option awards tied to a five-year contract extension through 2023," the analysis revealed.

Netflix Inc.'s Reed Hastings and Adobe Inc.'s Shantanu Narayen are the only two of the 25 highest-paid CEOs who led companies that ranked in the top 25 for 2018 shareholder return, it added.

Moreover, 20 percent of the companies with the highest shareholder return gave CEOs the biggest paychecks, with a median of about 14 million dollars, the analysis found. Yet, the 10 percent of companies with the lowest returns also paid their bosses generously, with a median of 12.6 million dollars.

The Journal cited a study by researchers at Cornell University and the Massachusetts Institute of Technology as saying the reason for the misalignment between pay and performance is that when setting operating and stock-market goals, the companies use "financial or other measures that don't meet generally accepted accounting principles."

The companies "instead substitute metrics that exclude some costs or financial benefits that the company deems outside management's control or not reflective of core performance," the report said.

The researchers found that companies that make big adjustments to measures of profit tend to pay their CEOs 16 percent more on average than those that don't. In money terms, the difference amounts to 1.9 million dollars a year.

As for solving the problem, one of the authors of the study suggested that companies provide more clarity about how performance is measured, according to the report. Enditem

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