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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 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.
October 2, 2013 SEC Proposes Rule on Required CEO Pay Ratio DisclosureSource: MONDAQ
On September 18, in order to implement the mandated disclosures under section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the U.S. Securities and Exchange Commission (SEC) proposed...
September 27, 2013 Oracle Shareholders Get Ready For Fight Over Executive PaySource: ValueWalk.com
Oracle Corporation (NYSE:ORCL) shareholders may be getting ready for a fight as dissatisfaction with CEO Larry Ellison’s high pay continues to grow, report Joann S. Lublin and Shira Ovide for The Wall Street Journal. The company...
September 23, 2013 A Better Way to Compare C.E.O. PaySource: Gretchen Morgenson, NY Times
Now the Securities and Exchange Commission has dipped its toe into the executive pay pool with a rule issued last week that would require companies to publish a comparison of their chief executives’ pay to the median compensation...
September 20, 2013 What’s the right ratio for CEO-to-worker pay?Source: Washington Post
On Wednesday, the Securities and Exchange Commission voted to propose a rule requiring companies to disclose the ratio of CEO pay to the average worker’s pay within their company. Big business has been fighting the Dodd-Frank...
September 19, 2013 SEC approves plan to reveal CEO-worker pay gapsSource: USA Today
A sharply divided Securities and Exchange Commission decision on Wednesday set the stage for potential final approval of the so-called "pay ratio" disclosure, a controversial rule required under the Dodd-Frank Wall Street Reform...
September 18, 2013 SEC to unveil CEO pay ratio rule, adopt municipal adviser ruleSource: Reuters
U.S. corporations will need to disclose how their chief executive's paycheck compares to that of their average worker under a proposal set to be unveiled on Wednesday by the U.S. Securities and Exchange Commission.
September 17, 2013 How Some CEOs Cheat Their Way To Higher PaySource: Thrink Progress
CEO pay schemes tied to company performance are routinely gamed by some of the largest companies in the United States in a practice that ends up bilking taxpayers of billions of dollars, according to new research. Some companies...
September 16, 2013 Companies Use IRS to Raise Bonuses With Earnings GoalsSource: Bloomberg
After Exelon Corp. (EXC) earned less than top executives needed to reach their annual cash bonus target last year, the company's directors provided a way to help bridge the gap: nonexistent profits.
September 16, 2013 What should we do about income inequality?Source: CNN Money
I find myself thinking more and more these days about income inequality. The New York Times published an astounding article Wednesday citing data that shows that America's top 10% of breadwinners had the largest share of overall...
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