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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
November 13, 2018 How to Tie Executive Compensation to SustainabilitySource: Harvard Business Review
The dilemma for directors, however, is determining what aspects of sustainability, or ESG performance, should have priority — and should be linked to pay incentives.
November 8, 2018 Third Point Sends Letter to Shareholders Detailing Campbell’s Unacceptable Executive Compensation Policies and Record of Rewarding FailureSource: AP News
NEW YORK--Third Point LLC (LSE: TPOU) (“Third Point”), a New York-based investment firm managing...has mailed a detailed letter to shareholders regarding Campbell’s record of wantonly spending shareholder money for poor CEO...
November 6, 2018 Middle Market CEOs and CFOs See Jump in PaySource: Odessa American
CHICAGO--(BUSINESS WIRE)--Nov 5, 2018--Middle-market company CEOs and CFOs received moderate pay increases during fiscal year 2017, according to the . CEO and CFO pay increased 4.4 percent and 4.5 percent, respectively, in 2017...
October 31, 2018 Study links accounting expertise to misstatement riskSource: Compliance Weekly
Accounting expertise coupled with high levels of executive compensation can increase the risk of misstatement in financial reporting, according to a new academic study.
October 23, 2018 Court of Appeals Seriously Weakens Executive Pay CapSource: JD Supra
The result of the decision is that providers subject to Executive Order 38 regulations (including health care providers and health plans regulated by the Department of Health, as well as early intervention programs, and...
Moving abroad boosts the average worker’s income by $21,000, with the best-paid staff found in Switzerland, the U.S. and Hong Kong.
October 11, 2018 Tax Change Aside, Companies Stick With Executive Performance PaySource: BNA
Companies that cut back on performance-based pay for their executives after Republican tax reform eliminated an incentive may be the black sheep in a herd that appears to be adjusting to the change more slowly.
September 27, 2018 CEOs are cashing in on the market boomSource: CNN
Insiders at US companies have dumped $5.7 billion of stock this month, the highest in any September over the past decade, according to an analysis of regulatory filings by TrimTabs Investment Research.
August 31, 2018 IRS guidance on executive comp still leaves questions unansweredSource: Accounting Today
The Internal Revenue Service’s initial guidance on the executive compensation deduction won’t settle all of the lingering questions.
August 27, 2018 IRS Guidance on Exec Comp Changes Falls ShortSource: CFO MAGAZINE
The Internal Revenue Service on Tuesday issued initial guidance on changes to the deductibility of executive compensation that were included in the Tax Cuts and Jobs Act
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