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CEORater Definitions & Methodologies

Core Principle

CEORater believes a CEO's primary responsibility is to generate returns for shareholders that outperform the broader market. Our core metrics are designed to measure this outperformance, or "alpha," in a clear and objective way.

Key Performance Metrics

  • TSR During Tenure: The total return of a stock to an investor, including stock price appreciation and dividends, over a specific period. We calculate TSR for the entirety of a CEO's tenure.
  • TSR vs. QQQ: Measures the CEO's TSR during their tenure compared to the QQQ Total Return over the same period. It is calculated by subtracting the Total Return of the Invesco QQQ Trust (a proxy for the NASDAQ 100 Index) from the CEO's "TSR During Tenure" over the same period. A positive value indicates the CEO has outperformed the market.
  • Avg Annual TSR: The annualized total shareholder return during a CEO's tenure, providing a standardized measure of performance over time.
  • Avg Annual TSR vs. QQQ: Measures the CEO's Average Annual TSR compared to QQQ Average Annual Total Return over the same period. A positive value indicates year-over-year outperformance against the market.

AlphaScore

The AlphaScore is CEORater's proprietary 0-100 rating of a CEO's performance, ranked relative to their NASDAQ 100 peers. A higher score indicates superior, risk-adjusted value creation. It is calculated in two steps:

  1. Percentile Ranking: Each CEO is ranked against all other NASDAQ 100 CEOs on two key metrics:
    • The percentile rank of their total TSR vs. QQQ
    • The percentile rank of their Avg Annual TSR vs. QQQ.
  2. Blended Score: The AlphaScore is the average of these two percentile ranks, resulting in a single, comprehensive score from 0 to 100.

CompScore

The CompScore is CEORater's proprietary letter-grade rating (A-F, Highest-Lowest), of a CEO's compensation efficiency. It measures a CEO's total compensation cost per unit of Average Annual Total Stock Return generated during the CEO's tenure. The lower the total compensation cost per unit of return, the higher the CompScore.

CEORaterScore

The CEORaterScore is CEORater's flagship metric: a comprehensive 0-100 rating that combines both stock performance and compensation efficiency into a single, holistic measure of CEO effectiveness. This weighted composite score provides investors with a balanced evaluation of overall CEO value creation.

Calculation Method: CEORaterScore = (AlphaScore × 60%) + (CompScore × 40%)

  • 60% Weight on AlphaScore: Reflects our core principle that stock performance relative to the market is the primary measure of CEO success. This ensures CEOs who generate superior shareholder returns are appropriately rewarded in the overall rating.
  • 40% Weight on CompScore: Acknowledges that compensation efficiency is a critical component of shareholder value creation. CEOs who achieve strong returns while maintaining reasonable compensation levels score higher than those with excessive pay packages.
  • Conversion Method: CompScore letter grades are converted to numerical values (A=95, B=85, C=75, D=65, F=55) to enable mathematical calculation of the weighted average.

Interpretation: A CEORaterScore of 85+ indicates exceptional overall performance, 70-84 represents strong performance, 55-69 suggests average performance, and below 55 indicates underperformance relative to NASDAQ 100 peers.