Assessing the Relationship of CEO Compensation and Company Financial Performance in the Restaurant Segment of the Hospitality Industry

Abstract

Abstract There is a perception that little relationship may exist between company performance and CEO compensation. CEOs have personal goals that can conflict with the interests of shareholders. One approach to resolving this has been to align the incentives of executives with the interests of the shareholders. This solution may affect how top executives behave, and the caliber of executives an organization attracts. Using the Nations Restaurant News Stock Index, this study examined the correlation between company performance and CEO compensation in the restaurant industry. Results show that a positive correlation exists, although weak, among CEO compensation, gross revenue, net income, and stock price. Regression analysis indicated that stock price was a statistically significant predictor of CEO compensation.