Several lists of the highest paid CEOs in America are published each year mostly by the business media and shareholder groups. All are based on proxy statements. Long before the lists are published, the boards of directors of these companies try to justify the compensation packages for shareholders. Investors often are skeptical of these defenses, and they should be. It is rare, but not impossible, to show that a chief executive deserves $50 million, or even $100 million a year.

Read America’s 10 Highest Paid CEOs

Based on the annual CEO Pay Survey 2011 by GMI, 24/7 Wall St. identified the 10 highest paid CEOs. We then analyzed company performance of the highest paid CEOs to determine which pay packages were worth the investment.

Such a review about management compensation is by its nature subjective and different from a board’s reasoning. A board may take into account the long-term record of a CEO who has held his or her job for several years. The board might set a pay package based on an extraordinary year. The directors also may pay a CEO well just before he or she retires. 24/7 Wall St. has downplayed each of these factors, but has not eliminated them. Our judgment of “fairness” is based on what shareholders received in the year as the CEO’s compensation year. Our primary measurements are revenue growth, earnings growth and stock price change.

This is the 24/7 Wall St. list of the 10 highest paid CEOs for 2010 and an analysis of whether their compensations were worth the payments in terms of shareholder returns. All compensation considerations used to set pay, which include board of director criteria from each company, come from SEC-filed proxies.

10. Mario J. Gabelli
> Company: GAMCO Investors (NYSE: GBL)
> Total 2010 compensation: $56.6 Million

GAMCO did not do very well for investors in 2010. The price of the company’s shares was flat, considerably underperforming the S&P 500 increase of 14% that year. The company manages mutual funds and other investments for private individuals and public enterprises. GAMCO had a relatively good year in terms of revenue and earnings growth. Revenue rose from $218 million in 2009 to $280 million in 2010. EPS was up from $2.03 to $2.55. Based on the relatively small size of the company and GAMCO’s performance, however, Gabelli is overpaid.

9. Ronald A. Williams
> Company: Aetna (NYSE: AET)
> Total 2010 compensation: $57.8 million

Aetna’s shares were down 7% in 2010, underperforming the S&P 500 by a large margin. Williams’ pay was based on several factors, none of which was stock price. EPS, pre-tax operating margins and an increase in the dividend were the major measures of his performance, according to the board. The board can make the case, persuasively, that the insurance firm had a good year financially in 2010. The company’s EPS rose from $2.84 in 2009 to $4.18 last year, even though revenue fell slightly from $28.3 billion to $27.6 billion. Williams retired in 2011. The board gave Williams a relatively reasonable gift as he left, at least based on 2010 performance.

Also Read: America’s Most (and Least) Charitable States

8. Michael D. Fascitelli
> Company: Vornado Realty Trust (NYSE: VNO)
> Total 2010 compensation: $64.4 million

Vornado’s shares significantly outperformed the S&P 500 in 2010, up over 17% for the year. The board relies on EBITDA and total return to shareholders to set pay. Both improved in 2010 compared to 2009 as EBITDA rose from $1.7 billion to $2.2 billion. Vornado produced strong financials on a GAAP basis as well. Net income per share rose to $3.24 in 2010 from $0.28 the year before. Revenue rose from $2.7 billion to $2.8 billion. Fascitelli is a CEO who earned what he made.

7. Ralph Lauren
> Company: Polo Ralph Lauren (NYSE: RL)
> Total 2010 compensation: $66.7 million

The clothing designer and manufacturer gave investors an extremely good return on their holdings in 2010, as share price jumped 35%. In the fiscal year that ended last April 2, EPS rose from $4.85 to $5.91. Revenue grew by 13% to $5.7 billion. The one question investors might ask is whether Lauren’s compensation is based on fair deliberations by his board. The CEO owns shares that hold 75.6% of the corporation’s voting rights.

Also Read: Cars So Hot They Are Out Of Stock

6. Adam Metz
> Company: General Growth Properties (NYSE: GGP)
> Total 2010 compensation: $66.7 million

With General Growth, timing of was a major factor, and it highly matters to investors who put money into the company before it emerged from Chapter 11. The company entered bankruptcy in April 2009, and it became clear as early as April 2010 that it would exit Chapter 11 later in the year. The company began regular operations when the final reorganization was approved last November. The gain in the company’s shares from early 2010 to the end of the year was 14 fold. While the bankruptcy process makes it impossible to make reasonable P&L comparisons from 2009 to 2010, revenue has remained steady. Metz earned his money for those who took a chance on the company’s stock early last year.

5. Thomas M. Ryan
> Company: CVS Caremark (NYSE: CVS)
> Total 2010 compensation: $68.1 million

CVS Caremark shares underperformed the market last year and were only up 8%. That alone makes it hard to justify Ryan’s compensation. CVS’s financial results were also poor. Revenue fell from $98.7 billion in 2009 to $96.4 billion in 2010. EPS fell from $2.55 to $2.49.

4. Frank Coyne
> Company: Verisk Analytics (NASDAQ: VRSK)
> Total 2010 compensation: $68.4 million

Verisk slightly underperformed the market with its shares up 14% for the 2010 calendar year. A pay package of over $68 million is extravagant for that return. Coyne should get credit for a relatively strong year financially. EPS rose from $0.72 in 2009 to $1.36 in 2010. Revenue rose from $1 billion to $1.1 billion year-over-year.

Also Read: FBI – Crime Drops In First Half of 2011

3. John C. Plant
> Company: TRW Automotive (NYSE: TRW)
> Total 2010 compensation: $76.8 million

TRW shares soared during 2010, ending the year almost 105% higher. The extraordinary performance was driven by EPS, which rose from $0.51 to $6.49, as revenue moved from $11.6 billion to $14.4 billion. TRW, which supplies car parts, benefited from the rebound in the car industry, but Plant’s compensation is reasonable based on the results he delivered to shareholders.

2. Joel F. Gemunder
> Company: Omnicare (NYSE: OCR)
> Total 2010 compensation: $98.3 million

Gemunder’s 2010 pay package cannot be justified based on shareholder returns. The firm’s stock was up only 2% for the period. It is not any wonder. The company’s EPS fell from $1.81 in 2009 to a loss of $0.91 in 2010. Revenue fell from $6.2 billion to $6.1 billion.

Also Read: Cities That Have Fired Their Police Forces

1. John H. Hammergren
> Company: McKesson (NYSE: MCK)
> Total 2010 compensation: $145.3 million

McKesson’s shares were up 13% in 2010, underperforming the S&P 500. In that light, it is hard to imagine how the board of McKesson’s could have given Hammergen such an extraordinary award. McKesson’s revenue was $112 billion in 2010, up from $108.7 billion in 2009. EPS, however, fell to $4.62 to $4.29.

Douglas A. McIntyre

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.