1. Here’s One Way to Tell if a Company is Overpaying its CEO

    Here’s One Way to Tell if a Company is Overpaying its CEO

    U.S. companies that use nonstandard numbers to calculate executive compensation are overpaying their top managers, according to a new research report. The working paper, “High Non-GAAP Earnings Predict Abnormally High CEO Pay,” by Nicholas Guest of Cornell University’s Samuel Curtis Johnson Graduate School of Management and S.P...

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    1. We hypothesize that large, positive differences between non-GAAP and GAAP earnings are associated with excessive CEO compensation.
    2. There is no requirement to reconcile metrics used for compensation purposes with GAAP, which complicates the analysis.
    3. Directors should read this important paper.
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