Are CEOs Paid for Performance? What 500 Companies' Data Actually Shows

We applied two different tests to 269 S&P 500 companies in fiscal year 2024. The board’s scorecard says 62% are aligned. The market’s scorecard says 76%. The 14-point gap reveals something most pay analyses miss: the stock market quietly corrects board decisions that go wrong.

The two scorecards

Only half of S&P 500 CEOs pass both tests for pay-performance alignment. But which half depends entirely on how you measure — and the two standard approaches disagree by 14 percentage points.

Our database covers more than 500 S&P 500 companies and 6,600+ compensation reports. For this analysis, we narrowed to 269 companies with complete data for both scorecards (SCT and CAP) plus Total Shareholder Return (TSR) for fiscal years 2023 and 2024. We excluded companies with CEO transitions mid-year, missing CAP disclosures, or fiscal year mismatches that would prevent an apples-to-apples year-over-year comparison.

The test is directional: did pay move in the same direction as stock returns? This is deliberately simple — it captures the core question without introducing arbitrary thresholds. The trade-off: it doesn’t penalize magnitude mismatches (a CEO getting +200% pay for +2% stock returns would still count as “aligned”). We address that limitation in the methodology notes below.

The pay-performance matrix

When you apply both scorecards to the same companies, four patterns emerge:

The Ideal — 134 companies (49.8%)

Board decision and market outcome both aligned with stock returns. Both scorecards agree: pay tracked performance.

The Market Correction — 70 companies (26.0%)

The board’s pay decision was misaligned — but the equity-heavy compensation structure auto-corrected the outcome. This is the circularity effect in action: because 60%+ of CEO pay is stock, the market adjusts realized pay even when the board gets it wrong.

The Volatility Trap — 33 companies (12.3%)

The board set pay appropriately, but stock price swings made the CAP number look misaligned. This is the false positive: good governance that looks bad because of market noise.

Dual Misalignment — 32 companies (11.9%)

Both scorecards say misaligned. The board’s decision was wrong and the market didn’t save them. This doesn’t prove bad governance on its own — boards may have valid multi-year reasons — but it’s the strongest red flag in the data and the bucket that warrants the closest scrutiny.

What the 14-point gap reveals

The gap between the two alignment rates — 75.8% (CAP) versus 62.1% (SCT) — isn’t a flaw in the data. It’s the compensation structure working as designed. To understand why, look at what CEO pay is actually made of.

Stock awards do most of the work in CEO compensation. That is why market moves can reverse a board decision after the proxy is filed.

When the stock drops, the CEO’s realized wealth drops with it. That mechanical link is what creates the 14-point gap: equity-heavy pay auto-corrects 70 board decisions that would otherwise look misaligned.

The question is whether that mechanical correction is enough. In 32 companies — 11.9% of the sample — it wasn’t. Vesting schedules, one-time retention grants, and board discretion can all override the link. Those 32 are where governance matters most.

66 boards that raised pay while the stock fell

Using the board’s scorecard (SCT) alone — the test ISS applies to say-on-pay votes — 66 companies raised CEO reported compensation while their stock declined in FY2024. Below are four of the largest jumps.

Context matters: boards may raise pay for retention, prior performance, or multi-year plan cycles. But the pattern is visible in the data and rarely discussed in proxy statements.

We score each company on these dimensions on every company page. See the full scoring methodology.

How governance professionals test this

Professional frameworks formalize what we measured above. ISS uses the board’s scorecard; Pay Governance uses the market’s.

ISS (grant-date pay): Their Relative Degree of Alignment (RDA) compares a CEO’s pay rank against the company’s TSR rank within a peer group. Scores range from −100 to +100; S&P 500 flags fire at roughly −40 to −60. Their Multiple of Median (MoM) checks whether pay exceeds 2–3× the peer median. Both use grant-date values — what the board decided.

Pay Governance (outcome-based): Their “green zone” plots CAP rank against TSR rank and checks whether they fall within ±25 percentile points. Their research found a 0.56 correlation between CAP and TSR (versus just 0.08 for SCT). About 64% of S&P 500 companies land in the green zone. See the Harvard Law Forum on pay-for-performance alignment.

The bottom line

“Are CEOs paid for performance?” depends on which scorecard you read. The board’s scorecard says 62% aligned. The market’s says 76%. Only 49.8% pass both.

The 14-point gap exists because equity-heavy compensation is designed to auto-correct: when the stock falls, the CEO’s realized pay falls with it. That structure is doing its job in 70 companies that would otherwise look misaligned. But in 32 companies — 11.9% of the sample — neither the board nor the market delivered alignment. Those are the real governance failures.

The most useful approach isn’t to pick one scorecard. It’s to read both.

• If you’re a board member: Check whether your company lands in the “market correction” bucket. If equity is doing the alignment work, your pay design is resilient — but you should understand why.
• If you’re an investor: Focus on the “dual misalignment” bucket. Those 32 companies are where say-on-pay votes and engagement letters have the most leverage.
• If you’re a compensation consultant: The 14-point gap is a measurable argument for why CAP-based analysis supplements rather than replaces grant-date screens.

That’s what we build at rentseek.ing: the data and tools to evaluate any company’s pay practices yourself.