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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
December 27, 2016 Poll: Executive bonuses varied in 2016, need for say-on-pay questionedSource: HR Dive
A Willis Towers Watson poll finds that senior executives’ bonuses for 2016 showed wide variations. The global advisory and solutions firm polled 260 corporate executives and compensation specialists on Dec. 8. The firm cites...
December 27, 2016 Whole Foods charged with ill intentions over employee bonusesSource: HR Dive
Whole Foods, the national upscale grocery chain, has been accused of cheating employees out of their earned bonuses, the Washington Post reports.
December 23, 2016 If the SEC Measured CEO Pay Packages Properly, They Would Look Even More OutrageousSource: Harvard Business Review
To monitor this ratio, the Portland law will make use of data that, beginning in 2017, U.S. public corporations must file with the U.S. Securities and Exchange Commission (SEC) under the Pay Ratio Disclosure Rule. The SEC’s new...
December 16, 2016 Can a Tax Make High CEO Pay Go Away?Source: SHRM
Last week, a new front emerged in the campaign against high executive pay. Portland, Ore., became the first jurisdiction in the U.S. to require publicly traded corporations to pay a surtax if their CEO compensation is more than...
Source: Huff Post
Now, as the food giant struggles to recover its sales, one of the Denver-based burrito chain’s two CEOs ? who is among the highest-paid executives in the food industry ? is out.
December 5, 2016 The College President Millionaires ClubSource: Bloomberg
39 private college chief executives made more than $1 million in total compensation in 2014, according to data released Sunday by The Chronicle of Higher Education, up from 32 in 2013
November 29, 2016 Impact of 2016 US Elections on Dodd-FrankSource: National Law Rview
While we believe that a complete revocation is unlikely, we expect that several Dodd-Frank rules relating to executive compensation may be pared down or eliminated by the new administration acting in partnership with the...
November 21, 2016 Microsoft ties executive bonuses to diversity: Will it help?Source: CS Monitor
Microsoft announced plans this week to tie executive bonuses to company success at meeting diversity hiring goals, after the number of female hires fell this fall.
Source: National Law Review
Existing rules in Europe require, and proposed rules in the U.S. would require, companies and financial institutions to have in place effective clawback policies. Under such policies, employers have the ability to recover...
November 2, 2016 SEC Says Apple Must Allow Investors to Vote on Executive Pay ProbeSource: Fortune
The Securities and Exchange Commission said that Apple could not exclude a vote on whether the company should hire multiple outside experts to reform its executive compensation practices from its annual proxy.
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