A new study released today by Watson Wyatt Worldwide finds that TSX-listed Canadian companies that pay their CEOs well financially outperform companies with lower-paid CEOs.

The study shows that in addition to paying higher base salaries, companies with strong financial performance also awarded higher annual incentives, granted higher long-term incentives and provided higher total direct compensation to their CEOs than lower-performing companies, despite a poorer overall economy in 2001.

The study divides TSX companies into low and high performers based on Total Return to Shareholders over the three-year cumulative period from January 1, 1999 to December 31, 2001, as compared to the TRS for the TSX Composite Index for the same period.

Overall, the study finds:

  • companies with strong financial performance paid 9% higher base salaries, awarded 66% higher annual incentives, granted 52% higher long-term incentive values, and provided 42% higher total compensation to their CEOs than lower performing companies;
  • 86% of CEOs at high-performing organizations received bonuses, compared with 66% at lower-performing organizations;
  • the energy sector showed the strongest statistical correlations between CEO base pay and financial results; and
  • the average CEO had a base salary of $487,000 in 2001, up 14.4% from the previous year.