Does the CEO Deserve That Big Pay Package
Just about any way you look at it, CEO pay is outrageous. While chief executive officers say their pay is linked to company performance, many CEOs receive large paychecks and bonuses even while the company’s performance suffers. Want to see if your CEO’s pay package is related to company performance? Here’s how to find out:
The Yahoo search site has a section that provides the latest information on your company’s financial performance. Search for your company’s name to find out:
Your company’s most recent stock price . You can view a graph of your company’s stock performance. The share price reflects investor confidence (or lack thereof) in your CEO’s performance. Is the stock price trading near the high end or the low end of its 52-week range? You also can click on “Insider” to see if your executives are buying or selling shares, a good indication of how they view your company’s prospects. Or click on “News” to get the latest business stories dealing with your company.
Profile of your company’s financial data . Take a look at some of the common financial ratios that investors use to evaluate your company. You can see how profitable your company is by looking up its Profit Margin: the percentage of income earned on your company’s sales. Or look at a common measure of management effectiveness known as Return on Assets: the percentage of income earned by your company’s assets.
What the analysts recommend . Find out if Wall Street analysts are recommending that investors buy, sell or hold your company’s stock. Because analyst recommendations tend to be overly optimistic, be sure to compare the consensus recommendation with an industry average. Also, you can get a sense of your CEO’s recent performance by whether the analysts are upgrading or downgrading your company’s stock. You also can review your company’s earnings per share to find out if your CEO has outperformed or underperformed the analysts’ predictions. A positive or negative earnings surprise can have big consequences for your company’s stock price.
Now you’ve got a snapshot of company performance. Has performance gone up or down? How does the CEO pay package compare?
