“In the public market, exceptional CEO talent is hard to fi nd, and the competition is fierce. As in any economic model, CEO compensation is driven by supply and demand. Many industries’ CEOs are grossly overpaid. It’s not insurance; it’s the public company model and competitive market forces at work.
The real issue is the disparity of compensation from top to bottom, which affects morale. It’s hard to justify the earnings gap between a CEO paid $20 million, line underwriters making $70,000 or a product line manager making $150,000, based only on performance. Bottom line: The public company compensation model is broken.”
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“The compensation structure within insurance companies has been criticized for paying unusually large bonuses to CEOs whose companies’ fi nancial performance had been a failure. This criticism stems from boards not playing an active role in compensation policy. The appointment by the board of so-called ‘compensation experts’ to provide paid-for competitive compensation surveys to justify the CEO’s outrageous compensation continues.
The gap between an underwriter’s annual salary and the chief executive’s $3.5 million annual salary will continue to widen. Without a revolt by concerned company shareholders, don’t expect to see any changes in the future.”
“The answer depends on what you measure, how you measure it and what you compare. Insurance company CEOs were awarded pay – cash and non-cash remuneration – last year ranging from $21.3 to $24 million. That looks like a tight range. Broaden the study to include CEOs at fi nancial services companies generally, and the range widens to $19.5 to $124 million.
But were these CEOs worth their pay? When their pay is evaluated relative to their companies’ three-year operating performance, the insurance CEOs ranked poorly – at or near the bottom. That’s true even when you include the other financial services CEOs.”
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