Surely the best CEOs by TSR and ROE would emerge as the best paid? No way

We journalists are always being told we are too subjective and prone to bias.

For this reason, whenever there is a contentious story on the news agenda I gird my loins for the inevitable series of complaints about our coverage.

Whether it’s a staff hiring case or a hostile takeover situation, I already know that if we are exercising our judgment well, we are likely to anger both sides equally.

This presents us with an unfair paradox – the more objective we try to be, the more complaints we get!

For if only we could be biased to one side, only the other side would get annoyed and our hostile mailbag would be half the size.

This problem is not our fault – everything we write about is subjective.

No absolutely objective measures exist when choosing adjectives to describe our industry and its performance.

But surely the numbers should be the exception?

The great thing about reporting on a financial industry full of public companies should be that we should be able to be cold and unemotionally objective.

“The numbers never lie” would be the newsdesk’s defence against all criticism.

If only it were as simple as that.

Take the red-hot topic of executive remuneration.

Surely we could construct a method for measuring CEOs against their performance and proving beyond all reasonable doubt who were the best and worst in the business?

We would boil the numbers down, regressing CEO pay against total shareholder return as well as return on average equity.

Surely then the best CEOs would emerge as the best paid?

No way. It turns out there is no correlation between performance on the above metrics and pay.

And it didn’t matter how we sliced it or diced it, we got the same results every which way.

Indeed, the only thing we could conclusively prove was that the bosses of big companies almost always earn more than the bosses of small companies. No kidding!

I actually find some comfort in these results.

This is not just because I am an analogue journalist sitting at the cusp of the data age, but because so many of the benefits of great management are intangible.

If you want to find the great CEOs you should meet them all in person in good times and in bad. You should talk to their staff, their boards, their stakeholders, investors, suppliers and customers.

You should get a view in the round and you should exercise judgment.

Happily, as chroniclers of the industry we are privileged to be able to do all these things.

Sometimes there is something wrong or missing, a character flaw or void that reveals itself and cannot be glossed over by any amount of smooth PR.

But at other times you encounter something indefinite but very special, and you can validate it because others tell you they feel it too.

The latter don’t always get paid more than the former, but we all instinctively know who they are and gravitate towards them in our professional lives.

Investors do the same.

In our subjective world we already instinctively know who the best CEOs are, and we all agree that they deserve every penny they get.


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