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Executive Compensation, Trends, Executive Compensation Survey, Plans
Executive Compensation Introduction
Updated January 2011
The issues surrounding executive compensation – and especially CEO pay -- have been the topics of much discussion in Board Rooms, at Annual Shareholder Meetings and in the media, After a decade of intense debate, efforts to control executive compensation ((under Federal Law) took center stage when the U.S. Department of the Treasury issued interim final rules for reporting and recordkeeping requirements under the executive compensation standards of the Troubled Asset Relief Program (TARP) in January 2009. For the first time, the Federal government was taking a role in setting the compensation at private corporations. The actions resulted in an appointment of an Executive Compensation Czar within the Treasury Department to review compensation packages for companies receiving Federal assistance.
The effort did not stop here; further regulations are to follow with the enactment of the Dodd -Frank Financial Reform Legislation adopted in the Spring of 2010. This comprehensive package of “reforms” is now the focus of new regulations (that have to be developed implementing rules of the road). Unless the 112th Congress repeals parts of the law dealing with exec comp, the Federal government will have some kind of role in the issue. This has been welcomed by activist investors concerned about executive compensation policies and practices, especially at under-performing companies with outsized exec compensation.
In the worst cases, the focus of executive compensation packages has been upon corporate boards that are accused of being unrealistic, indifferent and in collusion with CEOs. What became the worst criticism was the revelation that too many agreements did not tie compensation with company performance.
“Say-on-Pay” became the rallying cry of shareholder groups and social and proxy activists as the hammer and anvil were hot and ready for hammering out reform. The Securities and Exchange Commission enacted rules for publicly-held companies to finally give a voice to shareholders through the proxy process on executive compensation. While the votes are not binding, they do serve to create an atmosphere of greater transparency and accountability of corporate boards to their shareholders.
Still the debate over the rules goes on; matters related to CEO compensation will continue to be the focus of this section. Whether you are located in the “C” suite or are a Corporate Secretary, Board Member, Investor Relations professional, shareholder or activist, Hot Topics Executive Compensation should be a daily stop for news, commentary and research.
Note: The Editors form no judgment about the level of pay and specific compensation of Chief Executive Officers and others in the “C” Suite. The purpose of this section is to fully air the issues surrounding exec compensation issues at shareholder-owned companies.
How much should a CEO or the top executive officers of a publicly-owned corporation be paid? What is a “fair” compensation? Especially when corporations are laying off thousands of workers and outsourcing work to distant lands? When the middle class is under attack – see CNN Lou Dobbs’ commentary on this? The issue of exec comp has become a burning question with an array of forces on all sides of the issue. When the stock market is doing well and “all boats are rising,” the issue is not as much in focus as when companies (or a single firm) is underperforming and the executive compensation is seemingly out of whack. Out of control. Disproportionate to performance. Unrelated to reality. And other battle cries by investor activists, public officials, journalists, advocate organizations, etc.
Consider the case of Home Depot, where the share price fell as the CEO’s pay package rose. Saying goodbye to the CEO, Mr. Nardelli, cost HD more than $200 million. Consider the exiting of the Wonderful Wizards of Wall Street, and their departure comp packages – totaling in the hundreds of millions’ of dollars – as the wreckage they’ve left behind (in the form of sub prime disaster loan portfolios) causes real pain on Wall Street, and on Main Street. We still don’t know the damage they caused with their financial wizardry – but the carnage is felt when home foreclosure rates increase dramatically, as they have over the past year.
So – what is a fair price for the Top Man (and a tiny handful of Top Women)? You’ll find news, commentary, research and other useful content here in this Hot Topic subsection of Accountability Central, as well as in various content sections and subsections. (See Corporate Governance, Shareowner Activism, Socially Responsible Investment, and other silos.)
Consider this as you formulate your own positions on the pay issues:
Enough highlights and commentary – we invite you to follow the often-heated discussions and public debate on executive compensation here in the pages of Accountability Central.
“…People will be accountable and responsible…”
President Barack Obama – on CEO Comp – February 4, 2009
Latest on Executive Compensation
November 14, 2014 Op-ed: Understanding executive pay at home and abroadSource: Deseret News
In recent years, an increasing emphasis has been placed on the idea that executives of major companies make an incredible amount of money each year. In the U.S., it is not uncommon to see executives making over 100 times more per...
November 13, 2014 Executive pay - If you hire them, pay will comeSource: The Economist
But if, as a chief executive, you want to earn more, then it makes sense to hire a compensation consultant. That is the conclusion of a new academic paper from the Judge Business School at Cambridge University. Previous studies...
November 12, 2014 More Transparency, More Pay for C.E.O.s
Deal Book - Many of the îconsultantsî, like Towers Watson, îMercerî and Aon Hewitt, offered multiple services in addition to îconsultingî on compensation. As a result, the S.E.C. theorized that...
October 31, 2014 Does Shareholder Scrutiny Affect Executive Compensation? Evidence from Say-on-Pay VotingSource: Value Walk
As a result of the Dodd-Frank Act of 2010, public firms must periodically hold advisory shareholder votes on executive compensation (“say on pay”). We examine how firms change the structure and level of executive pay when they...
October 21, 2014 Shareholder ‘No’ Votes on Pay Show UptickSource: CFO
A new report on the 2014 proxy season show a rise in the number of executive compensation plans that failed to receive majority shareholder support.
October 16, 2014 The Economist Who Won The Nobel Prize Figured Out Why CEOs Get Such Gigantic BonusesSource: Business Insider
Why are CEOs paid so well? In part, because they constantly have the opportunity to renegotiate their contracts, which are often heavy on the stock-based bonuses.
The Business Insider - Ricardo Duran, spokesman for the USâs second largest pension fund the California State Teachersâ Retirement System, said: âClearly communicating to the market how the company plans to use...
October 2, 2014 Coca-Cola shaves incentives for executivesSource: Trib Live
NEW YORK — Coca-Cola is curtailing its pay plan for executives since shareholders including Warren Buffett called it excessive.
September 25, 2014 U.S. Treasury denies allowing 'excessive' executive pay at GM, AllySource: Reuters
The U.S. Treasury last year permitted top executives at General Motors Co and Ally Financial Inc to collect "excessive pay" while those companies were part of a taxpayer-funded government loan program, a special inspector general...
September 24, 2014 Oracle Cuts Ellison’s Stock Awards, Adds CEOs’ IncentivesSource: BloombergBusinessWeek
Oracle Corp. (ORCL:US) changed its compensation plan for executives and is tying pay packages more closely to the company’s performance, following Larry Ellison’s decision to step down as chief executive officer
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