Time to air out CEO pay
By The Denver PostDenverPost.com
The salary gap between corporate CEOs and the workforce below has been growing, and increasing numbers of people, including shareholder activists and investment fund managers, think it's getting out of hand. New federal guidelines will shine a little light on the subject, though few expect that chief executive officer salaries will leave the stratospehere.
Expanded disclosure rules that the Securities and Exchange Commission plans to implement in 2007 will focus fresh attention on how much America's top executives make. We already know they make a lot, and a lot more than the rest of us. A detailed New York Times report last Sunday found:
In 2004, the average salary for a top executive at a big corporation was more than 170 times the average worker's earnings, up from a multiple of 68 in 1940. The gap really started growing in the 1980s.
CEO pay was up 27 percent on average last year, to $11.3 million. For the average wage-earner, taking home $43,480 in 2004, weekly pay rose just 2.9 percent in 2005 (and failed to keep pace with inflation of 3.3 percent).
Just over 80 percent of Americans think CEOs are overpaid, a percentage that varies little with income or political affiliation.
Many observers also have noted that CEO salaries, stock options and golden parachutes often increase regardless of a company's performance. Lots of reasons have been cited for the trend: Big gains from stock options in the 1990s, corporate competition for celebrity executives, overly generous compensation consultants and supine boards of directors.
The SEC thinks more disclosure will be valuable, and it has proposed 370 pages of rules that call for companies to explain how much the five highest-paid managers and all directors receive and provide greater detail about deferred compensation, retirement benefits, severance packages and perks such as travel, drivers, cars and housing.
Part of the agency's theory is that the "shame factor" will kick in. "I have a feeling that when people are forced to undress in public, they'll pay more attention to their figures," SEC Chairman Christopher Cox quipped in a recent speech.
Disclosure and shame have their uses, to a point. But setting more reasonable levels of CEO pay also requires institutional investors to get aggressive in questioning the companies they invest in. More than anything, corporate boards must apply reasonable standards to CEO compensation.
Info source: http://denverpost.com/opinion/ci_3708003
The salary gap between corporate CEOs and the workforce below has been growing, and increasing numbers of people, including shareholder activists and investment fund managers, think it's getting out of hand. New federal guidelines will shine a little light on the subject, though few expect that chief executive officer salaries will leave the stratospehere.
Expanded disclosure rules that the Securities and Exchange Commission plans to implement in 2007 will focus fresh attention on how much America's top executives make. We already know they make a lot, and a lot more than the rest of us. A detailed New York Times report last Sunday found:
In 2004, the average salary for a top executive at a big corporation was more than 170 times the average worker's earnings, up from a multiple of 68 in 1940. The gap really started growing in the 1980s.
CEO pay was up 27 percent on average last year, to $11.3 million. For the average wage-earner, taking home $43,480 in 2004, weekly pay rose just 2.9 percent in 2005 (and failed to keep pace with inflation of 3.3 percent).
Just over 80 percent of Americans think CEOs are overpaid, a percentage that varies little with income or political affiliation.
Many observers also have noted that CEO salaries, stock options and golden parachutes often increase regardless of a company's performance. Lots of reasons have been cited for the trend: Big gains from stock options in the 1990s, corporate competition for celebrity executives, overly generous compensation consultants and supine boards of directors.
The SEC thinks more disclosure will be valuable, and it has proposed 370 pages of rules that call for companies to explain how much the five highest-paid managers and all directors receive and provide greater detail about deferred compensation, retirement benefits, severance packages and perks such as travel, drivers, cars and housing.
Part of the agency's theory is that the "shame factor" will kick in. "I have a feeling that when people are forced to undress in public, they'll pay more attention to their figures," SEC Chairman Christopher Cox quipped in a recent speech.
Disclosure and shame have their uses, to a point. But setting more reasonable levels of CEO pay also requires institutional investors to get aggressive in questioning the companies they invest in. More than anything, corporate boards must apply reasonable standards to CEO compensation.
Info source: http://denverpost.com/opinion/ci_3708003
posted by PaperMaster at 8:43 AM
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