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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
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Credit Suisse’s chief executive is waiving part of his bonus in response to the lender’s first full-year loss since 2008, weekly Sonntagszeitung said on Sunday
February 2, 2016 ISS Publishes Updates To Its 2016 Executive Compensation PoliciesSource: Mondaq
On January 22nd, Institutional Shareholder Services Inc. ("ISS") updated its Frequently Asked Questions for US Executive Compensation Policies and US Equity Compensation Plans.1 The original FAQs were published on December 18,...
February 1, 2016 Why Most Companies Don’t Link ESG Performance to Executive PaySource: Environmental Leader
Linking executive pay to corporate environmental, social and governance performance isn’t a new idea but it’s been slow to gain traction.
January 27, 2016 Top 10 Topics for Directors in 2016: Executive CompensationSource: JDSupra
But this year, due to the SEC’s active rulemaking in 2015, directors will have more to fret about than just say-on-pay. Roughly five years after the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, the SEC...
January 22, 2016 JPMorgan CEO gets 35% pay raise to $27M amid cutbacksSource: USA Today
NEW YORK --Even as Wall Street braces for more cuts to jobs and bonuses, JPMorgan Chase CEO Jamie Dimon was paid $27 million in 2015, up from $20 million the year before, the company said Thursday.
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The Republican and Democratic party establishments are both in a panic about their respective party’s outsider front-runners. Entrenched establishment leaders sense revolution in the air, and rightfully so.
January 20, 2016 NYS Appellate Court Upholds Executive Compensation Order and Regulations: What Happens Next?Source: Lexology
On Dec. 30, 2015, the New York State Appellate Division, Second Department upheld the validity of Governor Cuomo’s Executive Order pertaining to executive compensation and administrative expenses of certain service providers (EO...
January 11, 2016 Obama's Weak 'Pay Transparency' Executive OrderSource: Huff Post
Employment lawyers are scrambling to help their clients comply with President Obama's new "transparency in pay" executive order, effective this week. They needn't worry. It's far too weak to harm employers, and it won't do...
January 6, 2016 CEOs of privately held firms eye modest compensation boostSource: Tire Business
GREENWICH, Conn. — As the lid closed on another year, CEOs of privately held companies expected to see their total cash compensation bump up slightly.
January 6, 2016 How should you set executive pay'
BBC - According to Tim Bush, from Pensions & Investment Research Consultants (Pirc), that's 180 times more than the average UK employee earns in a year. But how do you decide how much a chief executive deserves or needs to be...
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