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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
January 29, 2014 Compensation Resources, Inc. Releases Its 2013 Executive Compensation Survey of Privately-Held CompaniesSource: PR Web
Compensation Resources, Inc. (CRI) has released the results of its 2013 Executive Compensation Survey of Privately-Held Companies. The purpose of this study was to obtain compensation data of twelve key executive positions from...
January 28, 2014 American CEO Doug Parker to make $700,000 in annual salarySource: Sky Talk
American Airlines chief executive Doug Parker told employees he will earn $700,000 in salary this year although he could receive more in bonuses and stock if the carrier performs financially.
January 27, 2014 JP Morgan boss Jamie Dimon pay rises to $20m in 2013Source: BBC News
The chairman and chief executive of JP Morgan, Jamie Dimon, will be paid $20m (£12.1m) for the past year's work. Mr Dimon's pay was cut to $11.5m in 2012 following huge trading losses. This was half the $23m he received in 2011....
January 22, 2014 IBM top executives to forgo bonuses as profits fallSource: BBC News
The chief executive and senior management of IBM, the world's biggest computer-services provider, have said they will forgo their bonuses for 2013. The move comes as the firm reported a 5% drop in sales and 1% decline in net...
January 21, 2014 Ousted Yahoo exec's golden parachute may be a recordSource: CNN Money
Henrique de Castro is leaving Yahoo with an severance package estimated to be more than $60 million, one of the largest golden parachutes ever given to an executive who was fired.
January 17, 2014 Corporate Directors, Institutional Investors Remain Divided Over Current State of Executive Pay, Towers Watson and Alliance Advisors Survey FindsSource: Business\Wire
While agreeing that the U.S. executive pay model has improved over the past five years, corporate directors and institutional investors remain divided over several key aspects, including the impact of say-on-pay voting,...
January 14, 2014 The directors who set executive pay aren’t limiting their own raisesSource: Quartz
The perception of excessive pay not properly linked to performance puts executives—and the boards that sanction their compensation—in the crosshairs of activists, politicians and a wide variety of scolds.
January 12, 2014 CEO Salaries on the Rise
wltx.com - At a time most employees can barely remember their last substantial raise, median CEO pay jumped 27% in 2010 as the executives' compensation started working its way back to prerecession levels, a USA TODAY analysis of...
January 8, 2014 Determining Executive Pay: Boards Need to Assess CEOs' Behavior, Not Only Their PerformanceSource: PR Newswire
"Everyone expects boards to assess the performance of CEOs when determining their pay, but they must also assess the manner in which the CEO performs," says executive compensation expert Bruce R. Ellig, author of the...
January 6, 2014 5 Huge CEO Pay Raises of 2013Source: Investor Place
The median 2012 CEO pay package, for example, enjoyed a 16% year-over-year increase … even as the median household income showed no significant change. And that divergence is hardly new; CEO pay has grown 127 faster than worker...
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