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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
April 1, 2016 What If We Confiscated CEO Compensation For Large Health Insurers And Redistributed It To Members?Source: Forbes
Last month, AEI’s Mark Perry posted an interesting hypothetical: What if the compensation for all S&P 500 CEOs were confiscated and redistributed to rank-and-file workers?  It turns out that this redistribution would lift...
March 30, 2016 A Theory Of CEO Pay And Inequality: It's The TaxationSource: Forbes
It’s about, today, stock options and the way that the change to paying CEOs in this manner has contributed to perceived or measured inequality in pay in the US.
March 18, 2016 Why Dodd-Frank Has Not Dialed Down Sky-high CEO Pay
FORTUNE - According to a new report from public-advocacy nonprofit As You Sow, that's because most pension funds, mutual funds, and other institutional investors continue to rubber-stamp exorbitant pay packageseven when a CEO's...
March 11, 2016 Coca-Cola Cuts CEO Kent's Pay After Revamping Equity ProgramSource: Bl00mberg
Coca-Cola Co. slashed pay for Chief Executive Officer Muhtar Kent by 42 percent last year, following through on changes to a compensation plan that had drawn investors’ ire.
February 24, 2016 Performance-based pay isn't suited for executives: Here's whySource: Becker's Hospital Review
As much as 60 percent to 80 percent of senior executives' pay is often tied to performance metrics. However, research on incentives and motivation shows there is no material benefit to having variable executive compensation...
February 19, 2016 Citigroup Gave Its CEO a Huge Pay RaiseSource: Fortune
Citigroup raised Chief Executive Michael Corbat’s pay by an estimated 27% in 2015, a year in which the bank’s profit more than doubled.
February 18, 2016 100 Most Overpaid CEOs: Disney CEO Rober Iger Falls On Annual List, Les Moonves Of CBS RisesSource: International Business Times
America’s highest-paid bosses are doing just fine. But according to shareholder advocates, they’re doing better than they should be
February 17, 2016 This study says there are two reasons for the gender pay gap
World Economic Forum - The gender pay gap is still wide open. The World Economic Forum's Global Gender Gap Report 2015 shows that globally, women are still paid on average just above half the average male wage. While governments...
February 12, 2016 The Executive Pay Cap That BackfiredSource: ProPublica
Wealth, jobs and pay inequality are big political issues this presidential primary season, and they’re bound to become bigger once the parties pick their nominees. In the plethora of plans candidates tout for tackling these...
February 11, 2016 Executive pay is on the rise, which is good news for recruitersSource: Crain's NY
“Companies have to make top offers to hire top talent—or they’ll just lose them,” said Jason Wachtel, chief executive at JW Michaels (No. 7 on Crain’s list), who has been working in recruiting for 12 years. “The average raise is...
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