Marissa Mayer is a former Google executive who joined Yahoo! in 2012 as CEO. However, ever since she took over the company’s financial status went from bad to worse. In four years she earned well over $150 million in cash and Yahoo! stock. Credit: Wikimedia Commons

Corporate research firm MSCI correlated the salaries of around 800 CEOs with the performance of the companies they ran. That’s 429 large and medium-sized US companies in total. Not surprisingly if you follow the financial news one bit, the researchers found that at least between 2005 and 2014 a startling trend emerged: the higher the CEO’s salary, the poorer were the shareholders’ returns. Conversely, lower-paid top dogs ran companies with the highest returns.

Usually, the higher the CEO’s pay, the worse the company’s performance

The report, titled ‘Are CEOs paid for performance? Evaluating the Effectiveness of Equity Incentives’, offers bleak insight into the world of today’s leading corporations which rewards failure at the top executive level and punishes workers down the corporate ladder, often through pay cuts or layoffs to offset bad management practice.

“Equity incentive awards now comprise 70 per cent or more of total summary CEO pay in the United States, based on our calculations. Yet we found little evidence to show a link between the large proportion of pay that such awards represent and long-term company stock performance,” the report noted, which found that for every $100 invested in companies with the highest-paying CEOs, returns averaged $265 over ten years. However, over the same time frame and hundred bucks, investors who chose companies ran by more modestly paid CEOs took home $367.

Previously, the Wall Street Journal made a survey of 300s CEOs and the returns they offered to the shareholders of the companies they ran. The conclusion was that only one of the 10 highest paid CEOs ranked among the top 10% by investor performance.

Given a situation when a company performs poorly, maybe to the point where it’s close to bankruptcy, you’d expect the top chief’s salary to reflect this performance. Most often than not this isn’t the case. When a new CEO comes aboard, the board almost always agrees to highly advantageous clauses in the chief’s favor. This sort of clauses stipulate a generous base salary and stock options.

Viacom Inc.’s Philippe Dauman, for instance, earned 19% more last year netting $49 million — that’s despite shareholders of the media giant ended the year with a negative 6.6%. Guess who got laid off, Viacom’s operational employees or Dauman? He’s still going strong.

Of course, as we’ve learned from these sort of surveys, Dauman’s situation isn’t singular. Exxon Mobil chief executive Rex W. Tillerson has had mostly gloomy news for shareholders lately. Profits were down by half last year, and down 63 percent in the first-quarter financial results. In these tough times, Tillerson suffered a well-publicized 18 percent pay cut but still took home $27.3 million at the end of the day. Poor Rex.

But perhaps the most ludicrous top earning worst CEO is Yahoo’s Marissa Mayer who earned over $162 million in reported compensation (salary and stock) from the search giant over the past four years at the helm. That’s despite making over 20 high profile failed acquisitions, including $1 billion for Tumblr. Nothing really worked and Mayer failed almost at every turn. Hilariously, if the board wanted to fire her for doing badly, she would have earned $55 million as part of a severance package. Mayer might actually get it now that Verizon has bought off Yahoo last month and her role with the company in the future is very blurry.

“The highest paid had the worst performance by a significant margin. It just argues for the equity portion of CEO pay to be more conservative,” said Ric Marshall, a senior corporate governance researcher at MSCI.

“Whether you look at the entire group or adjust by market-cap and sector, you really get very similar results,” Marshall added.

How does this happen in the first place? Wouldn’t paying superstar CEOs a lot of money entice them to perform well? I mean, that’s why you pay them tens of millions every year, right? Michael Cooper, professor of finance at the University of Utah’s David Eccles School of Business, says paying CEOs more money can embolden them — but in bad ways. It makes the chiefs cocky, too overconfident of themselves and the quality of their decisions, even in tricky times like acquisitions, mergers or other dodgy enterprises.

“Pay is going up, and their performance is not getting any better,” says Cooper, who co-wrote a similar report of his own in 2013 which found big companies with CEOs who receive salaries higher than $20 million a year also have annual losses that average $1.4 billion.

Perhaps most importantly, a higher year in, year out paycheck means that most CEOs are focusing more on short term gains and investments, and less on longer-term strategy — the bread and butter of any seasoned corporation that’s been in the game for more than a decade. What Cooper and everybody else studying this perverse relationship suggest is simple: hold CEOs more accountable for their actions. Did the firm had bad earnings last year? Cut the CEOs pay. If it persists, fire him and make sure you sign him in the first place without a millions-of-dollars-worth compensation clause. That’s just silly and reckless.