Fair and Transparent Compensation

CEO Pay Declined in 2023

Contribution to the tenet

Provides strong evidence that executive compensation has grown disproportionately compared to typical workers' wages. From 1978 to 2023, CEO pay increased by over 1,085%, a staggering contrast to the modest 24% rise in typical workers' pay. The report argues that excessive CEO pay is driven not by superior skills or productivity gains, but by the power CEOs wield over corporate boards to secure economic rents, reinforcing the call to reevaluate and cap executive compensation to reduce income inequality.

Key findings

• —CEO pay rose over 1,085% from 1978 to 2023, against a 24% rise in typical worker pay.
• —The CEO-to-worker pay ratio reached 290-to-1 in 2023, up from 21-to-1 in 1965.
• —Excessive CEO pay is attributed to board power and rent extraction, not superior performance.

Executive synopsis

CEO Pay Declined in 2023 reveals that while CEO pay saw a dip in 2023, it remains extraordinarily high, escalating by over 1,085% since 1978. With CEOs earning 290 times as much as typical workers, the report argues that such disproportionate compensation is driven by managerial power and rent extraction rather than superior performance, directly supporting the call for balanced executive pay ratios to reduce inequality.

E&S Metrics in Executive Remuneration: North America and Europe

Contribution to the tenet

European companies reach 70% inclusion of environmental and social metrics in variable pay compared to 39% in North America. Linking executive compensation to long-term sustainability metrics serves as an indirect mechanism for moderating excessive CEO-to-worker pay ratios.

ESG Contests: Activism's Holy Grail or Side Show?

Contribution to the tenet

A special-situations research note exploring the evolving role of ESG themes in activist proxy contests. While primarily focused on how ESG issues feature in boardroom battles, it also addresses the recurring critique that excessive executive compensation signals dysfunctional corporate governance. Activists frequently highlight high CEO pay as evidence of managerial overreach and rent extraction, a central concern of this tenet.

Key findings

• —ESG themes are increasingly used to challenge corporate practices, including executive pay.
• —Activist campaigns begin to demand a reassessment of executive compensation, not only board refreshment.
• —Greater ESG integration could indirectly constrain CEO pay by raising governance standards.

Executive synopsis

ESG Contests: Activism's Holy Grail or Side Show? examines how ESG issues are emerging in activist campaigns and increasingly being used to challenge corporate governance, including excessive executive pay. Although ESG remains a subplot in many proxy contests, its growing prominence signals that investors are starting to demand that executive compensation be more closely linked to long-term, sustainable performance, supporting the broader argument for capping CEO pay and realigning incentives.

Why Pay Transparency Regulations Are a Strategic Management Opportunity

Contribution to the tenet

Argues that pay transparency regulations can be leveraged as a strategic advantage rather than treated merely as a compliance hurdle. By adopting both distributive and procedural transparency, organizations can demystify the pay-setting process and address inequities. In doing so, companies can restrain excessive CEO compensation by making the decision process clear, accountable, and aligned with long-term performance.

Key findings

• —Combining distributive and procedural transparency creates a fairer, more accountable pay process.
• —Procedural transparency mitigates the negative effects of mere pay disclosure.
• —Transparent pay processes help attract and retain talent while moderating executive pay.

Executive synopsis

Why Pay Transparency Regulations Are a Strategic Management Opportunity explains that when companies embrace not just pay disclosure but also procedural transparency, they create a fairer, more accountable compensation process. This strategic approach can help curb excessive CEO pay by aligning rewards with clear performance metrics and long-term objectives, ultimately contributing to a more equitable pay structure.

Will Salary Transparency Laws Change Employee Compensation?

Contribution to the tenet

Examines the potential impact of salary transparency laws on overall employee compensation. It discusses how such laws might prompt companies to adjust their compensation mix, potentially increasing the share of bonuses and other nonreportable perks. While focused on broader employee compensation, the analysis sheds light on how transparency measures could indirectly influence executive pay practices by forcing greater openness into pay structures.

Key findings

• —Transparency laws may shift compensation toward bonuses and nonreportable forms.
• —Greater openness reduces the opacity that lets CEO pay outpace worker wages.
• —The net effect on pay equity depends on how firms balance reported and nonreported elements.

Executive synopsis

Will Salary Transparency Laws Change Employee Compensation? explores whether mandated disclosure of pay ranges will alter the overall structure of compensation. The report finds that while increased transparency may empower employees and promote fairer pay practices, companies might respond by shifting compensation into bonuses and other perks. These dynamics have significant implications for executive pay ratios, suggesting that transparency can serve as a critical lever for moderating excessive CEO compensation and enhancing pay equity.

E&S Metrics in Executive Remuneration: A Focus on North America and Europe

Contribution to the tenet

Examines how companies in North America and Europe are increasingly incorporating Environmental & Social performance metrics into executive variable compensation. Although its primary focus is not solely the ratio between CEO and worker pay, it is highly relevant: by integrating these measures, companies attempt to align executive incentives with long-term sustainable performance rather than short-term financial gains, which can serve as an indirect mechanism to moderate excessively high pay ratios.

Key findings

• —European companies reach 70% inclusion of E&S metrics in variable pay, versus 39% in North America.
• —Linking pay to E&S goals constrains rent-seeking and ties rewards to long-term outcomes.
• —Energy and Utilities sectors lead the integration of E&S criteria.

Executive synopsis

This ISS report shows that European and North American companies are increasingly tying executive variable compensation to Environmental & Social metrics. In Europe, where 70% of companies incorporate such metrics compared to 39% in North America, this trend is reshaping incentive structures. By linking pay to broader sustainability goals, firms aim to curb excessive short-term rewards and better align executive performance with long-term value creation, supporting efforts to moderate disproportionate CEO-to-worker pay ratios.

Intermediate Sanctions (IRC Section 4958) — Excess Benefit Transactions and Reasonable Compensation

Contribution to the tenet

Source for the IRS reasonable-compensation standard governing nonprofit executive pay multiples.

A Model of Private Equity Fund Compensation

Contribution to the tenet

Models how PE management compensation is structured around exits, supporting the LBO ratchet and exit-linked compensation claim.

Executive Compensation and Governance Research

Contribution to the tenet

Anchors the managerial-power capture thesis and the cultural-signaling function of executive compensation structures.

G20/OECD Principles of Corporate Governance 2023

Contribution to the tenet

Supports the cross-jurisdiction drift toward moderated executive remuneration aligned with strategy and sustainability metrics.

Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews (Final Rule)

Contribution to the tenet

Supports the legal architecture of limited-partner ratification and enforcement of private-fund governance terms.

Executive Paywatch

Contribution to the tenet

Independent corroboration of the S&P 500 CEO-to-worker pay ratio near the cited baseline.

Global Private Equity Report

Contribution to the tenet

Bain industry report tracking the rising share of deal value flowing through co-investment structures.

Global Private Markets Report 2024: Private Markets in a Slower Era

Contribution to the tenet

Establishes how conventional return theses depend on leverage, multiple expansion, and deployment pacing rather than governance compatibility.

G20/OECD Principles of Corporate Governance 2023

Contribution to the tenet

Frames disclosure, transparency, and board responsibility toward stakeholders as the baseline governance standard the model treats as primary operating data.

ICGN Global Governance Principles

Contribution to the tenet

Defines continuous board accountability to shareholders and stakeholders, supporting governance as an operating standard rather than quarterly oversight.

Pay Ratio Disclosure (Final Rule implementing Dodd-Frank Section 953(b))

Contribution to the tenet

Establishes the regulatory CEO-to-median-worker pay-ratio disclosure regime against which the Tenet 2 fifteen-to-one to twenty-to-one ceiling is benchmarked.

Executive Paywatch: CEO-to-Worker Pay Ratios

Contribution to the tenet

Supplies empirical S&P 500 CEO-to-worker pay-ratio data (averaging 285-to-1) that frames how far the Tenet 2 ceiling departs from prevailing practice.