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57 BizEd September/October 2014 EXECUTIVES: G EORG E DOYLE /TH I N KSTOCK; AR ROWS: B OR ZAYA/TH I N KSTOCK COMPANIES THAT PAY their CEOs sky-high salaries, beware: That decision could lower finan- cial performance. In fact, accord- ing to a working paper, stock returns for com- panies with the highest paid CEOs can remain lackluster for up to three years, and CEOs whose compensation averages US$20 million or more correlate to annual losses averaging $1.4 billion. The research was conducted by Mike Cooper, professor of finance at the Eccles School of Business at the University of Utah in Salt Lake City; Huseyin Gulen, associate professor of finance at the Krannert School of Management at Purdue University in Lafayette, Indiana; and Raghavendra Rau, professor of finance at the University of Cam- bridge Judge Business School in the United Kingdom. The more executives are paid, the more overconfident they tend to become, say Cooper and Rau. As a result, these CEOs invest in riskier projects, approve more aggressive mergers and acquisitions, and spend more wastefully. The study also finds that, over long periods of time, returns for companies with highly paid CEOs are worse by approximately 12 percent. "While this study doesn't prove that increased pay is necessarily bad, it does show there is a link between increased pay and decreased finan- cial performance," says Cooper. "Businesses should reexamine how they approach executive compensation and incen- tives to maximize the financial performance of their business." "Performance for pay? The relation between CEO incentive compen- sation and future stock price performance" is available at ssrn.com/ abstract=1572085. Raghavendra Rau Huseyin Gulen Mike Cooper Higher Pay, Lower Returns IN MARCH, THE Institute for Emerging Market Studies at the Moscow School of Management Skolkovo in Russia and Ernst & Young released a report based on their survey of 1,109 professionals at multinational companies in the BRIC nations of Brazil, Russia, India, and China. The report outlines the trends driving the satisfaction, engagement, and retention of top talent in each market. To keep top talent, companies in Brazil reported that they need to pro- mote a high-energy, socially oriented culture within their organizations. Those in Russia cultivate positive work environments and create high potential for career growth. In India, companies emphasize fast pro- motions and salary increases. And in China, companies must demonstrate their rapid growth and desire to secure top talent. The report also highlights strategies for attracting and retaining employees. These strategies include accommodating different career goals across countries and professions; differentiating brand, internally and externally, by country and profession; developing leader and team-based behaviors that engage employees; creating work environments that match national preferences; and tailoring compensation and benefits to individual cultural differences. "Differentiating for Success: Secur- ing Top Talent in the BRICs" is avail- able at www.skolkovo.ru/public/ media/documents/research/SIEMS_ research_2014-03_eng.pdf. How MNCs Retain Top Talent