LESSONS LEARNED FROM CEO PAY AND MARKET CAP PERFORMANCE IN THE MINING AND METALS INDUSTRIES: IMPLICATIONS FOR THE BOARD OF DIRECTORS AND FOR CORPORATE GOVERNANCE

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Abstract

CEO pay was correlated with market capitalization performance. Three simple correlation tests of 2013 total CEO pay with market capitalization destruction over the approximate three and one-half year period, January 2011 through July 2014, yielded a 66% weighted average moderate correlation for thirty-four companies. The total market cap destruction for these companies was an estimated $120.1 billion with total CEO pay of $224.6 million. Thus, total market cap destruction was approximately 535 times greater than total CEO pay. During this approximate three and one-half year time period, the S&P 500 Index increased 51.8%. Our simple correlation tests do not imply any causality. However, some corporate governance researchers (Kostyuk, 2014 and Hilb, 2008) have advocated: “Pay for Performance, not Presence” which could include such correlations as part of executive compensation packages from Board of Directors’ compensation committees. Claw-back provisions could be used for market capitalization destruction in evolving executive compensation packages.

Keywords: CEO Pay, Market Capitalization, Corporate Governance, Board of Directors

How to cite this paper: Grove, H., Clouse, M., & Lassar, S. (2015). Lessons learned from CEO pay and market cap performance in the mining and metals industries: Implications for the board of directors and for corporate governance [Special issue]. Corporate Ownership & Control, 12(4), 813-818. https://doi.org/10.22495/cocv12i4csp1