Are CEOs being richly compensated despite poor performance?

At a time when inflation is at a 40-year high, and wages aren’t keeping up, the compensation of CEOs at large corporations keeps rising, despite the disapproval of some shareholder groups and even employees.

“Maximum Wage: Meet the 10 Most Overpaid CEOs in the Fortune 500—plus the 10 Most Undervalued,” a new Fortune report by Maria Aspan and Scott DeCarlo, takes a deep dive into what the leaders of the largest companies in America are earning, and asks whether it’s really justified. The Fortune 500 CEOs the authors evaluated earned a median total compensation of $15.9 million in the most recent fiscal year, up 30% from a year earlier, their research found.

To compile the rankings, Aspan and DeCarlo focused on pay vs. performance, based on returns for shareholders. They analyzed the compensation and stock performance of the 280 Fortune 500 CEOs who have been in their jobs for at least three years. No. 1 on the Most Overpaid list is Dexter Goei, CEO of cable provider Altice USA. The authors write: “Goei isn’t the highest paid CEO on our list. But he ranks No. 1 because Altice’s stock has underperformed so dramatically.”

Amazon CEO Andy Jassy didn’t earn a spot on the Most Overpaid CEOs list. But his compensation offers a striking contrast to what an Amazon employee earns. According to the report, “Jassy, who in July succeeded founder Jeff Bezos, had the highest CEO-to-worker [pay] ratio in the Fortune 500 last year. The retail Goliath, which has long faced complaints over working conditions in its massive warehouses, has been fiercely fighting unionization efforts at several facilities. Meanwhile, Amazon decided to award Jassy a 2021 pay package worth $213 million as granted—or 6,474 times the $32,855 median salary of Amazon’s employees.” You can find out which Fortune 500 CEOs are being overpaid based on their performance, along with a list of CEOs that actually deserve a raise here.

When it comes to CFOs and compensation, a Mercer analysis released in February found that finance chiefs at S&P 500 companies earned a median annual total compensation of $4,944,900 in 2021. That data was based on companies whose fiscal year ended between June 2021 and October 2021.

A CFO is usually the point person when it comes to setting budgets and spending plans. But not when it comes to setting executive compensation: It’s really the responsibility of a company’s board of directors and the compensation committee to set what a CEO earns, says Alyse Bodine, partner and global managing partner of the Financial Officers Practice at Heidrick & Struggles.

“Usually there are compensation consultants that the board would leverage,” Bodine explains. “And they would conduct a compensation study to determine what is the best structure.”

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

A new report by Gartner finds that CFOs view growth in tech as essential. In the next two years, 78% of CFOs surveyed plan to maintain or increase enterprise-wide digital investments, according to the report. And within their own finance departments, 52% of CFOs said they're scaling up digital investments, while 38% said they intend to maintain their current investment levels. The finds are based on a survey of 199 CFOs and senior finance leaders  

Going deeper

How to Spot—and Develop—High-Potential Talent in Your Organization, a new report in Harvard Business Review, outlines the telltale behaviors of successful employees. Typically, organizations look to past performance to identify future leaders. However, that method doesn't identify "early-career high potentials or people who haven’t had equitable access to mentoring, sponsorship, development, and advancement opportunities," according to the report. The authors share a model they've developed for predicting leadership potential that’s grounded not in achievements but in measurable behaviors.

Leaderboard

Gregory J. Peterson, SVP and CFO at Southwest Gas Holdings (NYSE: SWX), has announced his intention to retire no later than October 2022. President and CEO Karen Haller will continue to work with Peterson as the company undertakes the process to identify his successor. Peterson has worked at Southwest Gas for more than 26 years in various leadership roles.

Ron Shelton has been appointed as senior VP, CFO, and treasurer at Navitas Semiconductor (Nasdaq: NVTS). Shelton was previously CFO at Adesto Technologies, a provider of application-specific semiconductors. Prior to that, he was CFO at GigOptix, Cirrus Logic, and other semiconductor companies. Shelton is currently a member of the board and an officer of Parabellum Acquisition Corp. (NYSE: PRBM), a blank-check company.

Overheard

“Cash is still trash. Do you know how fast you're losing buying power in cash?"

—Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, told to CNBC.