Every proxy season for the past 20 years I have evaluated the performance of CEOs in the hotel industry using a proprietary pay-for-performance model. My goal has been to determine whether a CEO deserves his or her pay relative to their industry peers. I don’t really care about the size of someone’s paycheck as long as they earn it. After all, we do live in a capitalist society. I believe the salient issue is value creation and for public companies that corresponds to shareholder return. That is why CEOs such as Bob Iger at Disney, Jeff Boyd at Priceline and Stephen Holmes at Wyndham can demand multi-million dollar paychecks and be worth every penny. I would rather have owned shares in any of the above companies than in Supertel or Red Lion, regardless of how little Kelly Walters and John Eliassen were paid.
The AETHOS Pay-for-Performance Model looks at key financial metrics such as company size, stock appreciation, EBITDA growth, and total direct compensation within a defined peer group. The peer group for this study included thirty-six hospitality CEOs. The market capitalization of the group ranged from a massive $147B (Disney) to a micro $7M (Supertel). One might ask how I can compare Bob Iger to Kelly Walters. In fact, that is precisely what the model is intended to do. Interestingly, the analysis illustrates that Mr. Iger was worth more than his $34M paycheck, while Walters struggled to earn his $290K salary.
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