Examining if There is a Relationship Between CEO Compensation and the Stock Price and Net Income of Publically Traded Corporations in the State of Wisconsin, USA

Abstract

Calculating the economic value that a CEO
contributes to the worth of a corporation is seemingly a moot
point. The standard method of calculation is the use of financial
ratios, the firm’s stock price and to what degree were the overall
objectives of the enterprise accomplished. The purpose of this
quantitative research project was to investigate if any significant
relationship existed between the annual salaries of the CEOs of
48 publically traded firms in the State of Wisconsin, USA and
increases/decreases in the price of their corporations’ stock price
and net revenue. The author of this study selected the State of
Wisconsin as the basis for the study due to the number of
Fortune 1000 firms (25 the 16th highest in the United States) and
Fortune 500 companies (10). Some prominent firms include
Fiserv, Harley-Davidson, Johnson Controls, Kohl’s, Manpower,
Oshkosh Corporation and Rockwell Automation. The outcomes
of this research revealed that there was no statistically significant
relationship between increases/decreases in the price of
Wisconsin’s publically traded corporations’ stock price and net
revenue in 2008. However, in 2010 while there was no statistically
significant correlation between the compensation of corporate
executives of 48 publically traded firms in Wisconsin and
increases/decreases in the price of their corporations’ stock price
there was a statistically significant correlation between the
compensation of these executives and the net incomes of their
firms. Finally, three Wisconsin CEOs were ranked among the top
250 highest CEO/Pay ratios in America.