In fact, while nearly 90% found CEO severance packages “excessive”, and more than half see those packages as contributing to shorter CEO tenures – 15% have already taken action to remove CEOs with shoddy performance records, according to a survey by Russell Reynolds Associates.
Of those that had taken steps, over half cited poor financial performance as the chief reason. In addition, two-thirds of investors surveyed have voted for a shareholder resolution within the past year, while15% have sponsored such a resolution.
Too Much Money
With regard to CEO compensation, the survey found that:
- the vast majority (93%) believes CEO compensation should be more directly linked to performance,
- almost 90% say that CEO severance packages are excessive, and
- a little over 60% of US investors believe high severance packages contribute to the shortening of a CEO?s tenure by undermining the executive’s motivation to perform.
Survey participants were also asked to cite influential factors in the investment decision-making process. Results were as follows:
- a company’s financial performance was cited by 94% of the sample,
- the CEO’s performance was noted by 71%, and
- three quarters cited the company’s valuation
- more than half the sample listed corporate governance practices,
- slightly less noted the quality of a company’s board,
- the company’s adoption of specific accounting standards was cited by 49%.
In terms of CEO performance measures:
- financial record of a company was cited by 70% of institutional investors polled;
- company performance relative to the competition was noted by half the sample,
- almost 40% mentioned stock price as key,
- while only a third looked at company valuation.
In the US, investors express dissatisfaction with a CEO either through:
- written communication, cited by 37%,
- or selling their stock , 35%.
Investors in Europe and Asia convey opinions of a CEO’s performance through meetings with a company’s board and senior management.
The survey, “CEO Turnover in a Global Economy” was based on interviews with more than 300 institutional investors from Australia, Canada, France, Japan, the UK and the US.
– Camilla Klein firstname.lastname@example.org