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Compensation Advisory Partners (CAP) examined 2016 executive pay and company performance at 29 companies in the utility industry with median revenue of approximately $10B. The study focused on performance trends and external market factors affecting pay practices within the industry.
2016 Financial Performance
Overall, the utility sector performed well versus the broader market. Utilities saw strong total shareholder returns (TSR) of +19% for the year versus the S&P 500 index of +12% for 2016. The impact of the 2016 U.S. presidential election on the market helped drive the strong returns. Specifically, the potential for pro-growth policies related to economic stimulus, tax reform and reduced regulations, led to a significant impact on the shareholder returns of certain industries, such as financial services. However, the utilities industry underperformed the S&P 500 with TSR finishing out the year flat following the election compared to +5% gain for the S&P 500. This may be a result of investors repositioning their portfolios away from utilities, in anticipation of potential pro-growth policies from the Republican controlled government. Now, nearly midway through 2017, with some delays in potential regulatory changes, utilities TSR year to-date (as of 5/31/17) of +13% is outpacing the S&P 500 (+9%).