By The Numbers: Pay-For-Performance Methodology

The methodology for the examination of CEO pay-for-performance included an evaluation of three years of sales, net income, stock prices and total compensation using a size regression analysis adjusted for companies with more than $1 billion in sales.

The Obermatt/CRN evaluation of pay-for-performance was a two-step process.

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First, we defined a company's performance based on revenue growth, profit growth and share price returns. For each metric, we then ranked how well the company performed against its peers and assigned it a percentile rank -- a company with sales growth higher than 75 percent of its peers received the percentile rank of 75. We then took the average of the ranks of the three metrics to arrive at the final total rank.

Second, to measure pay, we added the total pay CEOs received over the last three years and compared it with the company's total rank. For true pay-for-performance, a company that received a total rank of, say, 75 percent, should also be in the 75th percentile. The difference between actual total CEO pay and performance-based CEO pay is where we see pay excesses or underpayments.

RICK WHITING contributed to this story.