BUSINESSWEEK ONLINE : FEBRUARY 5, 2001 ISSUE
ECONOMIC TRENDS Money Can't Buy a Loyal CEO Only a lot of equity seems to work One common justification for the huge compensation packages doled out to many chief executives in recent years is that they encourage loyalty. Paying a CEO top dollar, it's believed, keeps him happy and less likely to depart for greener pastures. It ain't necessarily so, report Maria Hasenhuttl and J. Richard Harrison of the University of Texas at Dallas. In a study presented at a recent Academy of Management meeting, the researchers analyzed CEO turnover from 1995 to 1997 at 1,233 publicly traded companies. They found that relative CEO compensation--that is, pay relative to industry averages--had no significant impact on turnover, whether measured by total compensation or by salaries, bonuses, or stock options separately. What's more, salary hikes also made no difference. Relatively high-paid CEOs were as likely to job hop as low-paid chiefs--with one notable exception. Those with large company stockholdings did tend to exhibit more loyalty--possibly, the authors write, because of the power, prestige, and added job security such ownership brings. In exhibiting an apparent lack of loyalty, of course, richly paid executives may be simply reflecting the new rules of the game in today's high-pressure corporate world. According to executive-compensation consultants Pearl Meyer & Partners, some 20% of the largest 200 U.S. companies replaced their CEOs last year, many because of concerns over falling stock prices or failure to meet performance goals. By GENE KORETZ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					INTERACT E-Mail to Business Week Online

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