Authors: Gary F. Keller
Calculating the economic value that a CEO contributes to the worth of a corporation is seemingly a moot point. The standard method of calculation is the use of financial ratios, the firm’s stock price and to what degree were the overall objectives of the enterprise accomplished. The purpose of this quantitative research project was to investigate if any significant relationship existed between the annual salaries of the CEOs of 48 publically traded firms in the State of Wisconsin, USA and increases/decreases in the price of their corporations’ stock price and net revenue. The author of this study selected the State of Wisconsin as the basis for the study due to the number of Fortune 1000 firms (25 the 16th highest in the United States) and Fortune 500 companies (10). Some prominent firms include Fiserv, Harley-Davidson, Johnson Controls, Kohl’s, Manpower, Oshkosh Corporation and Rockwell Automation. The outcomes of this research revealed that there was no statistically significant relationship between increases/decreases in the price of Wisconsin’s publically traded corporations’ stock price and net revenue in 2008. However, in 2010 while there was no statistically significant correlation between the compensation of corporate executives of 48 publically traded firms in Wisconsin and increases/decreases in the price of their corporations’ stock price there was a statistically significant correlation between the compensation of these executives and the net incomes of their firms. Finally, three Wisconsin CEOs were ranked among the top 250 highest CEO/Pay ratios in America.
Keywords: Executive Compensation, Firm Economic Performance, Valuation of Corporations, Management Theory