Executive pay is one of the most debated topics in corporate governance, especially when set against the backdrop of stock market performance. In theory, CEOs’ remuneration packages should reflect their companies' success, measured by long-term value creation and share price performance.
However, after we analysed the average remuneration (including bonuses) of FTSE 100 and FTSE 250 CEOs over the last three years against their companies’ performance over the last 3 years, the correlation between pay and share price performance is, at best, weak. This disconnect highlights concerns about the alignment of CEO incentives with shareholder interests.
