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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
September 25, 2014 U.S. Treasury denies allowing 'excessive' executive pay at GM, AllySource: Reuters
The U.S. Treasury last year permitted top executives at General Motors Co and Ally Financial Inc to collect "excessive pay" while those companies were part of a taxpayer-funded government loan program, a special inspector general...
September 24, 2014 Oracle Cuts Ellison’s Stock Awards, Adds CEOs’ IncentivesSource: BloombergBusinessWeek
Oracle Corp. (ORCL:US) changed its compensation plan for executives and is tying pay packages more closely to the company’s performance, following Larry Ellison’s decision to step down as chief executive officer
September 22, 2014 As the Economy Heats Up, Nonprofit CEOs See Pay RiseSource: The Chronicle of Philathrophy
Charity executives of big nonprofits and foundations are beginning to win bigger raises after a long run when the median annual increases did little better than keep up with inflation, according to The Chronicle’s annual...
September 12, 2014 5 Reasons the SEC's Executive-Pay Rules Matter -- And 5 Ways to Use ThemSource: Huff Post
Two little-known rules on corporate reporting of executive pay are currently being reviewed by the Securities and Exchange Commission. While they have received almost no press coverage, these rules could have far-reaching...
September 3, 2014 Former CEO Calls Executive Pay ‘Extreme,’ Says Own Pay Was ‘Ludicrous’Source: Mint Press News
David Dillon, the former CEO of the supermarket chain Kroger, told the audience of an Aspen Ideas festival that his pay in his last year on the job, which clocked in at nearly $13 million, “even seems ludicrous to me.”
September 2, 2014 Britain's top bosses earn '143 times more' than staff
Economic Times - The think-tank carried out the study using pay figures from company reports and data from the Pensions Investment Research Consultants.
August 29, 2014 How Obamacare is taking a bite out of CEO paySource: CBS News
Obamacare is known for overhauling how millions of how Americans buy health insurance, but it is also quietly having an effect on another key aspect of health care costs: executive pay.
August 28, 2014 Harvard Endowment Compensation Sparks Letter From AlumniSource: Bloomberg
A group of alumni that has previously criticized Harvard University for how much it pays its endowment managers is again finding fault after compensation more than doubled in three years at the investment arm.
Source: Yahoo News
When Washington eliminated corporate tax deductions on health insurance executive compensation above $500,000 under President Barack Obama's healthcare reform law in 2013, it generated more than $72 million in additional tax...
August 22, 2014 How Sudden CEO Deaths Help Us Understand Executive CompensationSource: Bloomberg/BusinessWeek
It’s easy to complain that corporate executives are overpaid. It’s harder to make a rigorous case for the idea: There’s no perfect metric to show how much executives are worth to a company, thus no great way to compare an exec’s...
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