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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
June 25, 2015 CEO Pay vs. Performance
Executive compensation is increasingly geared toward results, but some CEOs still got big paydays even when their investors didn’t do so well.
June 24, 2015 Dodd-Frank’s Next Act: Executive PaySource: CFO
Nearly five years after the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law, the Securities and Exchange Commission has entered the final stretch of the rulemaking required of it under the...
June 22, 2015 Top U.S. CEOs make 300 times what workers earnSource: CBS MoneyWatch
How do you value the efforts of America's top chief executives? Are they worth 10 times what their average worker makes, 20 times or even 100 times?
Source: Seattle Times
Most commentary about exorbitant executive compensation tends to fit accepted niches. Three overarching factors caused the CEO-to-worker compensation ratio of 20-to-1 in 1965 and 30-to-1 in 1978 to skyrocket to 296-to-1 in 2013.
Source: The Motley Fool
It's been the same song and dance for Caterpillar (NYSE: CAT ) and its shareholders over the last couple of years: annual declines in revenue and operating profits, accompanies by a stock price stuck in neutral. In 2012,...
SPRINGFIELD - MassMutual Financial Group boasts that being a mutually held company means it answers to policy holders who own participating life insurance with the company and not Wall Street or stockholders.
Source: Grand Rapids Business Journal
Almost everyone believes they are paid what they deserve unless they think they are under paid. In 40 years of compensation work, I never recall anyone saying they were paid too much. Some people will admit they are paid well,...
LONDON- Lloyds Banking Group boss Antonio Horta-Osorio will forfeit 350,000 pounds ($5 36,000) in bonuses after the bank was fined 117 million pounds for failings in the way it handled complaints about mis-sold loan insurance.
June 3, 2015 Shareholders push companies to change executive paySource: The Hill
Responding to pressure from investors, a third of companies say they have changed their executive pay compensation plans, according to a new survey from the National Association of Corporate Directors (NACD) released Tuesday.
Financial Times - It voted 94 per cent of the time in favour of awards to the 100 most âoverpaidâ US chief executives in an analysis by îAs You Sowî, a Californian shareholder advocacy group. Mr Leary...
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