By and large I don’t feel that the information on past performance exists, and where it does, to a large extent it is the result of data provided by the prior corporation itself.
I think there is a massive informational gap out there, which, combined with the short termism engendered by the Anglo-American model of business financing, leads to perverse incentives that are bad for long term economic prospects.
I also, to answer your later stuff, don’t believe that profit maximization is a realistic model for modern businesses.
Top 5 complete executive pay, and performance - is available from publicly available SEC documents.
Unless a CEO is hired out of the lower ranks (i.e. NOT one of the top 5 officers of a company), you can see how much he was paid, and you can look at the firm’s performance.
What are you not seeing in the Income Statement, Balance Sheet, Cash Flow from Operations and Footnotes that you need to see?
Did the company’s value increase under the CEO, vs. their peers? This is a chart in every proxy - nice pretty picture to make it simple (I used to charge $5000 to make that chart every year for a client).
And if judging corporate performance (which is all that can possibly tell you, not CEO performance) from SEC filings were that easy, investment would be a lot less of a difficult game to play.
Back when I was in that game, studies showed that 50% of an investment’s performance came from the market, 45% from the sector, and 5% from the individual stock itself. Using this same information, that judges the corporate performance in a retrospective snapshot. And encouraging CEO’s to manage to short term reporting requirements is not necessarily a long term success strategy.
Say you start in box 2. You have a competent, but not brilliant, CEO. But the compensation committee, named by him, may think he is a bit smarter than he really is. In any case, by your argument, they want to move to box 4, to keep him. Now you have a theoretical advantage. Your competitor, who is now in Box 3, clearly needs to move to Box 1. Perhaps their CEO isn’t as smart as yours, but who is going to tell him that? Your CEO, being smart enough to see he screwed up and a problem is on its way, decides to jump ship. The interviewing company, seeing his high salary, figures he must be a great guy, and hires him. Your company now needs a CEO. You look at the CEO of your competitor, see he is highly paid, and knows the business too, and hires him away. You pay hims some more to come, which destabilizes the situation, and we continue to spiral up.
In your scheme, being in box 3 is never justified, even if your CEO is screwing up.
THE CEO DOES NOT NAME THE COMPENSATION COMMITTEE!!!
I don’t mind the populist uprising going on here, but you guys REALLY should do a little bit of reading first. CEO compensation at a public company is set by the compensation committee of the Board of Directors. The membership of that committee is disclosed in the Proxy. For example, Apple Computer (I posted this in another thread already, but the “kill the rich” idiocy around here is tough to fight):
The members of Apple’s Comp Committee:
Finally, since someone here will always bring up that everyone takes care of each other:
So the CEO does NOT set his own pay, nor does he set his own bonus or stock awards. He can negotiate for higher pay, he can hire a compensation consultant to argue on his behalf, he can purchase enough shares to swing the vote - but he does not set his own pay.