Research conducted at the University of Colorado has found that media coverage of a CEO in a major business publication could boost executive salaries by as much as US$1.4 million.
The study looked at how non-executive or "outside directors" evaluate the performance of the CEO. Researcher Markus Fitza shows that outside directors are more likely to be influenced by press coverage of the CEO - resulting in an increase in the salary package the CEO receives.
"Non-independent board members, such as members who are also firm employees and CEOs themselves, are more likely to rely on their daily experience of the CEO's contribution rather than on external sources such as newspaper articles," Fitza said in explaining the difference.
On average, an article featuring a CEO in a major business publication increased the value of the stock options and bonus the CEO received by more than US$600,000. If the board had a majority of insider members, that impact was reduced by about US$330,000.
The research also found that the media profile did not have to be flattering to produce a salary boost, and that the boost in compensation generated by media coverage had no correlation to the performance of the company.
"As CEOs appear in pictures and headlines of major business magazines, they are more likely to be perceived as legitimate and efficacious," Fitza said.
The study examined 3,500 large, USA publicly traded companies from 1997 to 2005.
Source: http://www.colorado.edu/news/releases/2007/465.html
Tracking the media, monitoring the message
