In my last post, I wrote about Robert Half International (RHI, Financial), which I think is a quality company. During my research, I noticed that the CEO’s pay seemed to be quite high. I then benchmarked Robert Half CEO’s pay against one of its competitors, Kforce (KFRC, Financial). What I found made my jaw drop. According to Morningstar, Kforce’s CEO made $13.75 million in 2015. When I compared that against the company’s results, it shows that the CEO made 32% of 2015 net income.
This piqued my curiosity. I Googled “overpaid CEOs” and found the following table at www.corpgov.net. It shows the 25 highest paid CEOs of 2014.
I then retrieved 2014 net income data from Yahoo Finance and made the following table. No CEO came close to Kforce’s CEO from a percent of net income perspective.
| Company | 2014 CEO Pay (Mil) | Market Cap($Mil) | 2014 Net Income (Mil) | Pay as % of Net Income |
| Discovery Communications Inc | $156.08 | $11,474 | $1,162 | 13.4% |
| Oracle Corp | $75.34 | $163,546 | $10,955 | 0.7% |
| CBS Corp | $57.18 | $26,131 | $2,959 | 1.9% |
| Chipotle Mexican Grill Inc | $57.08 | $12,668 | $445 | 12.8% |
| Microsoft Corp | $84.31 | $396,089 | $22,074 | 0.4% |
| Vertex | $36.64 | $21,158 | -$742 | -4.9% |
| Yahoo | $42.08 | $35,329 | $7,521 | 0.6% |
| Exxon Mobil Corp | $33.10 | $367,017 | $34,082 | 0.1% |
| Qualcomm Inc | $60.74 | $74,797 | $7,967 | 0.8% |
| General Electric Co | $37.25 | $276,973 | $15,233 | 0.2% |
| Salesforce.com Inc | $39.91 | $49,814 | -$263 | -15.2% |
| Honeywell International Inc | $29.14 | $86,713 | $4,239 | 0.7% |
| Walt Disney Co | $46.50 | $172,196 | $7,501 | 0.6% |
| Bristol-Myers Squibb Company | $27.06 | $118,888 | $2,004 | 1.4% |
| Viacom Inc | $44.33 | $16,364 | $2,391 | 1.9% |
| JP Morgan | $27.70 | $225,250 | $21,745 | 0.1% |
| Prudential Financial Inc | $37.48 | $33,918 | $1,426 | 2.6% |
| Coca-Cola Co | $25.22 | $196,063 | $7,867 | 0.3% |
| Regeneron Pharmaceuticals Inc | $41.97 | $38,874 | $338 | 12.4% |
| CVS Health Corp | $32.35 | $112,611 | $4,645 | 0.7% |
| Target Corp | $28.16 | $47,243 | $2,449 | 1.2% |
| Wynn Resorts Ltd | $25.33 | $9,281 | $723 | 3.5% |
| Allergan PLC | $36.61 | $79,589 | -$2,407 | -1.5% |
| Comcast Corp | $32.96 | $149,078 | $8,477 | 0.4% |
| Bed Bath & Beyond Inc | $19.12 | $7,053 | $957 | 2.0% |
I then compared the five-year stock price performance for Kforce, Discovery Communications (DISCA, Financial), Chipotle (CMG, Financial), Regeneron (REGN, Financial), Vertex (VRTX, Financial) and Salesforce (CRM, Financial) from 2009 to 2014. These are the companies with the highest CEO pay as a percentage of net income, plus the two companies with negative net income.
To do a normalized comparison, I checked the five-year period from 2010 to 2015 for Kforce because I’m using the 2015 CEO salary. Kforce’s stock price went up 103% over that span.
Final look
I’m not sure who you would consider the most overpaid, Discovery’s CEO or Kforce’s CEO. My vote would be for Discovery because the absolute dollar figure of $156 million is flat out obscene. On a performance basis, you could make a strong argument for Kforce as the CEO was paid 32% of net income on five-year stock appreciation of 103%. If Tim Cook were paid 32% of Apple's (AAPL, Financial) 2015 net income, he would have received $17 billion.
From most recent Discovery Proxy Statement
I followed up to see what Discovery's CEO made in 2015. Discovery’s net income was $1,034 million, which means the CEO only took 3% of net income on total compensation of $32.4 million in 2015. The five-year stock performance up to 2015 was 70%. After finishing this entire exercise, I was left shaking my head.
Feel free to share your thoughts on CEO pay in the comments below. Any other overpaid CEOs who should be mentioned?
