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Called to Account: Here’s one way to tell if a company is overpaying its CEO

U.S. companies that use nonstandard numbers to calculate executive compensation are overpaying their top managers, according to a new research report.

The working paper, “High Non-GAAP Earnings Predict Abnormally High CEO Pay,” by Nicholas Guest of Cornell University’s Samuel Curtis Johnson Graduate School of Management and S.P. Kothari and Robert Pozen at the Massachusetts Institute of Technology’s Sloan School of Management, finds that non-GAAP earnings, or those that do not conform with Generally Accepted Accounting Principles, exhibit a significantly positive relationship to CEO pay.

The study is based on GAAP and non-GAAP earnings and compensation data for S&P 500 SPX, +0.66% companies from 2010 to 2015.

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