CEOs Earn More Than They Would Without U.S. Boards Showing Bias
By Zachary R. Mider and Jeff Green - Apr 25, 2012 9:55 PM ET
CBS Corp. (CBS) directors decided to give Chief Executive Officer Leslie Moonves a $69.9 million pay package last year after assessing the competitive market for senior executive talent.
The board defined that market as pay for CEOs at companies that are on average more than twice as large as CBS, and many in businesses far afield from media.
Such lopsided comparisons aren’t unusual at U.S. corporations. To justify how much they offer CEOs, board compensation committees measure against the pay of CEOs at other companies, often picking larger firms from different industries that pay more and don’t consider themselves rivals for management prospects.
“There is pretty straightforward evidence of cherry- picking, and it’s pervasive,” said Thomas DiPrete, a sociologist at Columbia University who has studied the use of self-selected peers to set CEO pay.
The size gap between CBS and its peers, for instance, is one of the widest in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg and more than 10,000 peer relationships supplied by Equilar, a company that sells compensation data. The data reveal companies with traits that researchers say are associated with bias: those that set pay against peers that are much larger, in different industries, or that rarely cite the subject company in return.
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