CEO pay that's disconnected from true performance is of utmost importance to investors and everyday Americans these days. When you consider the outrage that's galvanized Occupy Wall Street protesters, you can't leave this ratio out of the equation: Last year, the average pay of S&P 500 CEOs soared to 343 times that of the average worker.
Some companies are worse than others in this regard. Independent corporate governance research provider GMI recently released its countdown of the worst of the worst in CEO pay. Are you the proud owner of any of these stocks? You might want to rethink what's poised to drain your returns dry.
Huge reasons for concern
Through its Executive Pay Scorecards, GMI examines the quality of S&P 500 companies' policies and practices in executive compensation. The organization's latest report sums up the ratings it's scored for 456 companies.
It's not consoling that the lion's share of the companies analyzed (58.1%) rated "average concern." Only 19.5% (89 companies) managed "low concern" ratings on executive compensation. As far as cause for alarm goes, 22.3% (102 companies) were ranked as "high concern."
That means we investors need to stay alert and use our proxies for say-on-pay votes. Obviously, the takeaway here is that most companies require at least some resistance to outlandish CEO pay matched with far too little shareholder return.
Some shareholder worst-case scenarios
GMI revealed the 10 worst-scoring companies in its analysis. Here are a few examples; you might recognize from recent headlines about shareholder unfriendly behavior.
Abercrombie & Fitch
Although many of these examples refer to outgoing CEOs and their exit packages, bear in mind that there's already a cultural precedent between board and management that will likely continue into the future unless shareholders have been doing something to stop it. Investor, beware.
Fight or flight
Companies like these ruin things for shareholders who care about reasonable pay for real performance. After all, such outrageous outliers skew the entire compensation landscape, and allow boards and managements to justify paying egregious pay for too little reward. The fact that peer groups come into play in devising compensation schemes points to the rigged game these folks play with shareholder money.
If you own some of the worst companies in terms of outrageous CEO pay, you'd best either rethink your holdings or brace yourself for the worst (and be prepared to use your proxy to exercise your new right to say on pay). In corporate America today, well-paid CEOs don't always indicate well-run companies -- or well-rewarded shareholders, for that matter.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.