Objective of the Study:
To Analyze the Compensation Structure of CEOs in Large Public Companies and Its Potential Correlation with Investment Returns.
Background: In the corporate landscape, the compensation of Chief Executive Officers (CEOs) has always been a topic of discussion, primarily because it’s seen as a reflection of the value and performance they bring to their respective organizations. Furthermore, for stakeholders, understanding this dynamic can be crucial when evaluating the governance and efficiency of a company.
Primary Goals:
Descriptive Analysis: To provide a comprehensive overview of the distribution of CEO compensations across large public companies. This includes understanding the central tendencies, dispersion, and the overall distribution pattern of their compensations.
Relationship Analysis: To explore if there is a direct relationship between the magnitude of a CEO’s compensation and the investment return the company yields. This would help stakeholders discern whether higher compensations generally translate to better financial performances, or if other factors might be at play.
Expected Outcome: Upon completion of this analysis, we aim to understand the distribution of CEO compensations in the context of their company’s investment returns. This will provide insights into whether there’s a direct relationship between CEO compensation and the success of their companies in terms of investment return.
Dataset Description: An Excel file (Data) containing total compensation (in $millions) for CEOs of 200 large public companies and the corresponding investment return for a recent year.
Instructions:
Part 1: Distribution and Visualization of CEO Compensation (3 Marks)
1. Frequency Distribution:
– Using Excel, construct a frequency distribution for CEO compensations.
– Set a lower boundary for the first bin at 0 and use a class width of 5.
– Construct a corresponding percentage distribution.
(help: frequency distribution excel – Recherche Google )
2. Graphical Representation:
– Create a histogram to visualize the frequency distribution (use excel).
– Construct a percentage polygon alongside the histogram (use excel)..
(Help: Construct a histogram and percentage polygon using excel – Recherche Google).
3. Cumulative Percentage Distribution:
– Using excel, construct a cumulative percentage distribution for CEO compensations.
– Using excel, plot a cumulative percentage polygon (ogive) for CEO compensations.
(Help: Cumulative Frequency Polygon in Excel – YouTube )
4. Analysis and Conclusions:
– Analyze the results from steps 1-3.
– Provide conclusions about the CEO compensation distribution, identifying any trends or patterns observed.
5. Relationship Visualization:
– Using Excel, construct a scatter plot to visualize the relationship between total compensation and investment return.
6. Analysis of Relationship:
– Interpret the scatter plot and describe the observed relationship between the total compensation and investment return.
Part 2: Numerical Descriptive Statistics (2 Marks)
1. Central Tendency:
– Using excel, calculate and report the mean, median, and mode for both variables (CEO compensation and investment return).
2. Dispersion:
– Using excel, calculate and report the standard deviation and variance for both variables.
– Using excel, calculate the coefficient of variation for each variable and provide an interpretation of the results.
3. Relationship Between Variables:
– Using excel, calculate the covariance between CEO compensation and investment return. Interpret the result in terms of the relationship direction (positive/negative) and strength.
– Using excel, calculate the coefficient of correlation between the two variables.
– Interpret the magnitude and direction of the relationship.
Note: Select your own groups, which consist of maximum of 4 and minimum of 2 students. Each group should submit online (blackboard) the word and the excel files