Our team, Trojan Worldwide, was recently interested in the average compensation and average return over five years of the top 800 CEO’s worldwide. We reached out to a CEO evaluation company to provide us with a sample of 60 CEO’s, including their compensation and return over five years. With this information, we were able to analyze the data and make inferences about the top 800 CEO’s worldwide. We were able to decipher which variables were relevant to deciding compensation, which included but was not limited to performance, profits, growth, and sales.
Though we were able to work with some of the population parameters in our research, we mostly worked with the ...view middle of the document...
Once dropping the outliers, we redid our hypothesis testing and concluded the alternative hypothesis was not statistically significant, therefore supporting the null hypothesis which stated that the average compensations for CEO’s was about $1.5 million. We were able to locate variables which related to these averages and locate variable which did not relate to these averages. By working with the sample data, we were able to infer about the population parameters for the average CEO compensation and average return over 5 years.
Five Key Points
* The population data for the average compensation is heavily skewed to the right due to the extreme outlier of Walt Disney. Mr. Eisner is the highest paid CEO by a long shot. Mr. Eisner is able to demand an extreme compensation because he is able to place a high return on his creativity. Due to the fact that he works in a creative industry, Mr. Eisner gets to the reap benefits of a productive creativity.
* The distribution for the average return over five years seems more normal and to follow the empirical rule. After conducting our confidence interval at the 95th percentile to determine the average return, we were able to verify that our true population mean fell within this interval. We were able to infer that average return for the population was around 15%, which was validated by our sample mean and median.
* In addition, we were able to determine the compensation range for the different talent levels of the CEO’s worldwide. If you were an...