Executive salaries of CEOs working at publicly-traded companies have not been linked to company performance in the last five years, according to a study published by the Bank of Israel on Tuesday.“The main finding of the study is that a CEO’s salary is positively correlated with the size of the company and its performance (both accountingwise and on the stock market).At the same time, it appears that the sensitivity of CEO salaries to performance has been declining over time to the point where, during the last five years, CEO salaries could not be explained by company performance,” states the central bank report. “The size of the company is the main factor explaining CEO salaries.”Making use of the largest sample gathered so far of personal and salary information on CEOs in publicly-traded companies, the study – carried out by Meital Graham from the Research Division of the Bank of Israel – attempts to determine which factors have influenced the salaries of CEOs in companies that are traded on the Tel Aviv Stock Exchange during the last 15 years, .The study found that the link between CEO salaries and company performance has weakened over the past five years. The strongest link existed during the years 2000 to 2003, which were recession years. In contrast, during the years 2004 to 2009 no correlation was found between a company’s performance and the salary of its CEO.The average salary of a CEO grew in real terms by 104 percent from 1995 to 2009, to a level of NIS 2.5 million.As expected, it was found that the companies that paid the highest salaries to their CEOs were the banks, the insurance companies and financial service companies. It was also found that CEOs receive higher salaries in larger companies.In terms of salary structure, the study showed that a CEO is compensated for the relative performance of his company in the short-term of up to two years and not for its long-term performance.During years in which the market return is positive, a CEO will be compensated beyond what is called for on the basis of the company’s performance, and when the market return is negative his salary will decline.“If the company reports profits that are low relative to other companies in the industry, the salary will decrease and vice versa,” stated the study.“With respect to differences in the effect of various factors on CEO salaries over the course of the business cycle, it was found that the elasticity with respect to performance was in fact higher during a recession.”Similarly the study found that the decline in a CEO’s salary in reaction to a drop in the value of the company’s shares is larger than the increase in his salary in reaction to a rise in the value of its shares.The study also investigated the connection between the replacement of a CEO and the company’s performance. It was found that the poor performance of a company (accounting- wise) increases the probability of the CEO being replaced.“In contrast, stock market performance operates in the opposite direction,” stated the report. “A CEO will prefer to leave a company at its ‘peak,’ in order for him to present enhanced personal achievements at his next company.”Furthermore, the study showed that the seniority of the CEO at the company has a positive influence on his salary but its contribution declines over time, while other characteristics were found not to influence the size of his salary.The study is the first to investigate the incidence of co- CEOs and found gaps in salaries between two CEOs in the same company during the same period. These were dependent on the differences in the CEOs’ holdings, seniority, level of education and function on the Board of Directors.Thus, a co-CEO with greater holdings will have a higher salary, while the seniority of a co-CEO will contribute to a higher salary.In addition, a co-CEO with an academic degree will in fact have a lower salary than a CEO with only a high school education – a finding explained by the negative correlation between the level of formal education and the CEO’s percentage holding in the company – and a co-CEO who serves as a director on the board of directors or as the chairman of the board earns more than a co- CEO who only serves as a CEO.