Compensation for S&P 500 chief executives has soared in recent years even as investors cast more of their advisory "say on pay" votes against management, leading to doubts about the usefulness of the ballots.
But a study to be released on Thursday by activist shareholder group As You Sow makes the case that the votes can limit high pay, at least in cases where it is not matched by solid returns for shareholders.
The conclusion amounts to a warning for corporate directors who will face judgment from investors as the spring annual shareholder meeting season gets under way, amid continued inflation and worker layoffs.
Poor pay designs "eventually come home to roost," said Rosanna Landis Weaver, co-author of the annual study of "overpaid chief executives" widely read by pay experts, especially as some companies award their leaders massive share packages.
Topping As You Sow's list this year is Warner Bros Discovery chief executive David Zaslav, who received $246.6 million for 2021, the media company's most recent disclosure.
That amount was driven largely by options awarded when it was known as Discovery Inc. Discovery's total shareholder return for 2021 was minus 22 per cent, versus a gain of 29 per cent for the S&P 500.
Discovery Inc had several share classes that boosted insiders' power and voted on Mr Zaslav's pay only once every three years, effectively insulating him from shareholder pressure, Ms Weaver said.
In contrast, she referred to cases where critical votes were followed by pay reductions, such as at auto parts maker Aptiv, where only 57 per cent of votes cast "for" or "against" executive pay favoured the $31.3 million paid to chief executive Kevin Clark in 2020.
The company paid Mr Clark $14.7 million the following year and said in a securities filing that it took into account feedback from shareholders and won support from 92 per cent of votes cast.
Warner Brothers Discovery, created last year when Discovery Inc bought AT&T's media assets, has not set the frequency of its pay votes.
A spokesman said Mr Zaslav would need to more than double the company's current share price to start to benefit from the one-time options grant that drove his 2021 pay figure and was meant to keep him as leader of the combined company.
"The vast majority of the headline number is theoretical," said spokesman Nathaniel Brown.
Aptiv representatives did not respond to requests for comment.
To rank chief executives as "overpaid," As You Sow used criteria including shareholder returns, critical shareholder pay votes and the ratio of chief executive to worker pay.
It noted the average share of votes cast "against" executive pay at S&P 500 companies climbed to 12.6 per cent last year, from 11.7 per cent in 2021 and 10.4 per cent in 2020.
Average S&P 500 CEO pay was $18.8 million in 2021, compared with $15.6 million in 2020 and $15 million in 2019, according to HIP Investor, a contributor to As You Sow's report, now in its ninth year.
HIP Investor's chief executive, Paul Herman, said a pattern was clear from the reports that executives listed more frequently as overpaid also delivered worse shareholder returns.
"It’s not a philosophical debate. They have made investors less money, yet they’ve been paid more," Mr Herman said.