Categories: OLD Media Moves

Biz media coverage of CEOs helps boost their pay

Media coverage of a CEO in a major business publication boosts the executive’s salary by as much as $1.4 million in part because that coverage affects outside directors evaluate the CEO, according to a study from the University of Colorado at Boulder Leeds School of Business released Monday.

The Sarbanes-Oxley Act of 2002 resulted in more outside directors on corporate compensation committees under the assumption that they were more impartial assessors of CEO performance. Research by Markus Fitza, a doctoral candidate at the Leeds School, shows that those outside directors are more likely to be influenced by press coverage of the CEO — resulting in an increase in the stock options and bonus 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.

The research found that 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 $600,000. If the board had a majority of insider members, that impact was reduced by about $330,000.

CEOs increased their salaries by as much as $1.4 million with a profile in a major business publication, the research found, and a profile did not have to be flattering to produce a salary boost.

“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, which examined 3,500 large, publicly traded companies from 1997 to 2005, also found that the boost in compensation generated by media coverage had no correlation to the performance of the company.

Chris Roush

Chris Roush was the dean of the School of Communications at Quinnipiac University in Hamden, Connecticut. He was previously Walter E. Hussman Sr. Distinguished Professor in business journalism at UNC-Chapel Hill. He is a former business journalist for Bloomberg News, Businessweek, The Atlanta Journal-Constitution, The Tampa Tribune and the Sarasota Herald-Tribune. He is the author of the leading business reporting textbook "Show me the Money: Writing Business and Economics Stories for Mass Communication" and "Thinking Things Over," a biography of former Wall Street Journal editor Vermont Royster.

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