Ontario Teachers’ Pension Plan officials released the results of a study on Wednesday that concludes that CEO compensation in Canada cannot be correlated to total stock returns.

“The results of this study raise serious questions about the alignment between CEO compensation and the market performance of their companies,” said Brian Gibson, senior vice president, public equities at the OTPP.

The research study comprised a sample of 65 Toronto Stock Exchange-listed companies. The companies in the sample met two major criteria: (1) they had share price data dating back to Jan. 1, 1995, so that executive stock option grants could be valued properly; and (2) they were among the largest 100 companies as of Jan. 1, 1995 that are still active today.

The comparison itself was based on company results from 2001-2003, inclusive, and compensation for the years 2002-2004, inclusive, to allow for the backward-looking elements in CEO pay. The study results, including an explanation of data sources and statistical methodology, and a list of the companies, are available on OTPP’s Web site at www.otpp.com.

In explaining the rationale for conducting the study, Mr. Gibson noted: “In recent years many boards have tried to improve the link between executive pay and company performance. We conducted the study to measure the results.”

He added that, although “a few individual companies may have made good progress, in general there is no empirical evidence that compensation has become better linked to performance. On behalf of the many active and retired teachers who are shareholders in Canadian companies, we are encouraging boards to re-examine their executive compensation structures to find ways to improve the link between pay and performance.”