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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
May 15, 2014 Doubling Down on C.E.O. PaySource: NY Times
In an era of what many perceive as outsize executive compensation, it’s not unusual for a successful public company to lavish its chief executive with a multimillion-dollar pay package. But what happens when there are two chiefs?
May 14, 2014 Morgan Stanley shareholders approve executive paySource: Financial News
Morgan Stanley shareholders approved the investment bank's 2013 executive compensation plan by a wide margin in a meeting that ended without a single question from the audience.
Source: The Economic Times
Struggling electronics giant Sony will not pay bonuses to senior executives for the third straight year, the Japanese company said Tuesday, as it braces for another disastrous earnings showing. The move means that President Kazuo...
April 27, 2014 CEOs Staying In Their Jobs Longer
Forbes - Fewer CEOs got fired last year. Thatâs the finding of a new study by New York research non-profit îThe Conference Boardî, which combed through press reports to compile its data. Two Conference Board...
Chief executives of companies in the Standard & Poor’s 500-stock index made an average $11.7 million last year. The average production and nonsupervisory worker: $35,239. That means CEOs are paid 331 times the average worker,...
April 24, 2014 Buffett Disapproves of Coca-Cola's Pay PlanSource: ABC News
Warren Buffett says he disapproves of Coca-Cola's highly contested pay plan for its executives. Buffett, whose company is the beverage maker's largest shareholder, called the plan "excessive" in an interview on CNBC after it was...
April 24, 2014 Ex Wal-Mart CEO's deferred pay: $140 millionSource: USA Today
Departed Wal-Mart CEO Mike Duke's deferred pay should provide enough money to shop beyond discount retailers for many years. Duke, who retired Jan. 31, had $140.1 million in deferred compensation at year's end, Wal-Mart said...
April 23, 2014 CEO Compensation Comparison Lacks PerspectiveSource: CAPCON
As a union tries to make CEO pay an issue, others question the comparison. Economist Antony Davies said that if McDonald's were to not pay its CEO or all senior management and instead divide those tens of millions of dollars...
April 22, 2014 Some companies cutting executive perks
St. Louis Post-Dispatch - As the Corporate Library, a governance-research firm that's now part of GMI Ratings, said in a 2010 study, "If the board cannot set appropriate limits for the CEO in this regard, will it be able to do so...
April 22, 2014 Caterpillar's CEO compensation cut 32% to $12MSource: PNJ.com
DALLAS (AP) - Caterpillar cut the value of its CEO's pay package by 32% to $12 million in 2013, a year when the heavy machinery maker saw its profits fall by a third, according to an Associated Press analysis. Chairman and CEO...
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