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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
October 31, 2013 Wall Street Firms Poised to Disappoint Bankers on BonusesSource: Bloombergb
Goldman Sachs Group Inc. (GS), which set Wall Street pay records when stocks surged and cheap credit abounded in 2007, is again leading the industry as markets boom anew: putting aside less money for staff and more for investors.
For the first time ever, the 10 highest-paid chief executives in the US received more than $100m in compensation last year, and two took home billion-dollar paychecks, according to a leading annual survey of executive pay.
October 22, 2013 4 Reasons the SEC's New Ratio Test Will Not Decrease CEO PaySource: Huff Post
On September 18, the SEC announced the proposal of a rule intended to increase disclosure of executive compensation as part of its ongoing effort to curb the growth of CEO pay. The new rule, promulgated under Section 953(b) of...
October 21, 2013 CEO-to-worker pay gap is obscene; want to know how obscene?Source: LA Times
Nothing seems to get U.S. corporations' dander up like a threat to the pay and perks of their chief executives. That's one explanation for corporate America's superheated, turbocharged, over-the-top reaction to the CEO pay ratio...
October 18, 2013 Congress' wrong-way approach to CEO paySource: LA Times
How can we bring down CEO pay? That was one of the questions Congress grappled with when it passed the Dodd-Frank Act in 2010. The public was outraged at the lavish pay of chief executive officers in a period of recession, and...
October 11, 2013 Majority of U.S. Public Companies Concerned About Complying With Proposed CEO Pay Ratio Rule, TowersSource: Daily Finance
U.S. public companies are more concerned about the cost and effort likely to be involved in complying with the Securities and Exchange Commission's (SEC's) proposed CEO pay ratio disclosure rule than they are about how...
October 10, 2013 Oracle Shareholders Urged to Vote Down CEO Pay PackageSource: Bloomberg
Oracle Corp. (ORCL) shareholders should vote against pay packages for executives and withhold support for directors on the board’s compensation committee, CtW Investment Group said. Chief Executive Officer Larry Ellison and other...
Source: NY Times
A group that advises several union pension funds plans to ratchet up the fight against Oracle Corporation‘s pay practices, especially for its founder, Lawrence J. Ellison.
October 7, 2013 Hot Issues in Executive Compensation 2013
metrocorpcounsel.com - Jeannemarie O'Brien, Wachtell Lipton Rosen & Katz; Lucian A. Bebchuk, William J. Friedman and Alicia A Townsend Friedman professor of Law, Economics and Finance, director fo the program on Corporate...
October 3, 2013 Oracle defends CEO's pay amid shareholder unrestSource: USA Today
SAN FRANCISCO (AP) — Oracle is facing a potential shareholder revolt against a compensation formula that has consistently made its billionaire co-founder, Larry Ellison, one of the best-paid CEOs in the world.
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