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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
May 11, 2017 David O. Friedrichs: Let’s set maximum wage for CEOsSource: Herald & Review
The Wall Street Journal reported last month that the CEOs of the 100 largest U.S. companies received average pay raises of 6.8 percent, more than offsetting cuts many corporate leaders took in 2015.
Source: US News
Globalization's rise in recent decades has widened income inequality in the U.S. while padding executives' pockets, according to a study put out by the National Bureau of Economic Research that directly links globalized commerce...
May 2, 2017 Target slashes CEO pay package after bleak yearSource: CNBC
Target's Chief Executive Brian Cornell took a sharp cut in compensation after the company failed to meet financial goals in a year marred by declines in sales and share price
April 24, 2017 Shire, Unilever and Astrazeneca face another shareholder spring as corporate governance consultants slam executive pay ahead of investor votesSource: City AM
Some of Britain’s biggest companies are set to face a fresh bout of shareholder rebellions over high levels of pay after influential corporate governance consultants advised investors to vote down remuneration reports.
April 20, 2017 Executive Compensation Is Right Where It Should BeSource: CFO
Executive pay is just about right — for today, which assumes an efficient market. To suggest otherwise would imply that there is a market irregularity, such as a bubble or inefficiency, which causes an imbalance in executive pay.
April 18, 2017 Executive Compensation ArrangementsSource: Oil and Gas Financial Journal
Designing compensation programs that retain and motivate key executive talent, while simultaneously maximizing shareholder value, is a challenge all public companies face. Responsibility for walking this precarious line falls to...
REDWOOD CITY, Calif.-- After seeing more modest gains than previous years in 2015, CEO pay appears to be trending upwards yet again. Among CEOs in the Equilar 100, total compensation increased a median 6% in fiscal year 2016....
April 10, 2017 Barclays’s Staley Faces Probe, Bonus Cut Over WhistleblowerSource: Bloomberg
Barclays Plc Chief Executive Officer Jes Staley, who has demanded the highest ethical standards from staff, will face a “significant” pay cut and is being probed by regulators for violating policy in trying to unmask a...
Source: The Verge
In January, the US Department of Labor sued Google, claiming that the company was withholding information relevant to an ongoing compliance audit. Now, the agency claims that it has found “systemic compensation disparities...
While federal policy-making aimed at tackling the wage gap could stall under Trump's administration, equal pay advocates are optimistic that state legislatures will take the lead on protecting women in the workplace.
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