Former Bridgewater co-CEO Eileen Murray: CEO compensation should be tied to ESG goals

Brian Sozzi
·Executive Editor
2 min read
7
In this article:

It's time corporate America's boards really drill down on excessive CEO pay and better align it with ESG (environment, social and governance) and other key goals, says former Bridgewater co-CEO Eileen Murray.

"I think boards should really take seriously how CEOs are compensated and how that aligns with the goals and objectives of the company," Murray, who is currently the chair of FINRA and sits on the boards of HSBC and Guardian Life Insurance, said on Yahoo Finance Live. "I do think we are going to increasingly see factors that are a piece of ESG be part of a CEO's compensation. I am a big believer in if it's measured, it will be managed."

An argument could quickly be made that boards of public companies continue to not measure CEO performance correctly. And because of that, the gap between CEO pay and the pay of the average worker continues to widen.

There is no better example of this than in the COVID-19 pandemic ridden year of 2020.

The median total compensation for S&P 500 CEOs in 2020 hit $12.7 million, a record high according to a study from Equilar. Total CEO compensation rose 5% in 2020, a faster pace than the 4.1% growth rate seen in 2019.

The gains reflect the strong bounce-back in the the stock market last year even as corporate profits were hammered by the pandemic. CEO compensation — which is often weighted toward stock options — tends to be closely tied to the stock price of a company.

Meanwhile, Equilar's research showed the median employee pay by S&P 500 companies was $72,670 in 2020, up 2% from $71,276 in 2019. That is if one wasn't among the millions of folks laid off during the pandemic.

But boards would be wise to course correct their thinking on CEO pay given increasing focus by investors on ESG initiatives.

Investors that in total manage $17.1 trillion in U.S.-centric assets have adopted sustainable investing strategies that include ESG criteria within investment decisions, according to Harvard Law research.

"I think that progress is what is important. It's a journey, not a destination," said Murray. "And so I think that CEOs need to be held accountable for their goals over time. I think that if they don't meet those goals over time yes, they should be shown the door."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

What’s hot from Sozzi:

Watch Yahoo Finance’s live programming on Verizon FIOS channel 604, Apple TV, Amazon Fire TV, Roku, Samsung TV, Pluto TV, and YouTube. Online catch Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, and LinkedIn.

Advertisement