Accountability Central Alert for May 16, 2011 - Executive Compensation: Still a Hot Button Issue for Investors

One of our AC editorial assistants eased her car into a service station last week to fill up in preparation for a weekend journey -- $68 later she began thinking about the many people on limited incomes (seniors and the unemployed and under-employed) who really struggle to keep their cars going and their families fed. Then as she turned on the all news radio station she heard about record oil company profits.

She thought about those profits and how that plays out for the oil company chief executives. Apparently, pretty well, according to Bloomberg Business Week. Their tabulation of last year's oil company CEO salaries shows an annual salary range from $143,000 to $2.2 million, coupled with bonuses of between $65,000 and $5.2 million. They also received long term options of between $191,000 and $250 million. (Source: Bloomberg Business Week).

The initial reaction from most people: “these salaries are obscene.” However, are they really that far out of line when you compare them with their company’s earnings? Those are the types of questions being asked right now in boardrooms and by shareholders at annual meetings throughout the US as the issue of Executive Compensation often dominates conversations and public venues such as corporate annual meetings.  

How much should a CEO or the top executive officers of a publicly-owned corporation be paid?  What is “fair” compensation? The issues surrounding executive compensation remains a burning question with an array of forces on all sides of the issue. When the economy is rolling along, the issue is not as much in focus as when people and small businesses are struggling and the executive compensation is seemingly out of whack, unrelated to reality. 

AC editors launched a special Hot Topics Section on Executive Compensation several years ago and it remains at the top of our most visited pages today. Here you’ll find news, commentary, research and other useful content in this Hot Topic subsection of Accountability Central, as well as in various content sections and subsections, such as Corporate Governance, Shareowner Activism, Socially Responsible Investment, and other silos.

Here are recent excerpts:

Exxon Mobil facing investor criticism on pay
(Source: Reuters) Investors and proxy firm ISS are criticizing Exxon Mobil Corp's compensation practices ahead of the company's annual meeting on May 25th, arguing the oil company's shareholder returns do not justify executives ' pay packages.

CEO pay exceeds pre-recession level
(Source: North County Times) CEOs at the nation's largest companies were paid better last year than they were in 2007, when the economy was booming, the stock market set a record high and unemployment was roughly half what it is today.

SEC proposes rules regarding independence of compensation committees and compensation advisers
(Source: Lexology) The Securities and Exchange Commission (SEC) has recently issued proposed rules implementing the provisions of the Dodd-Frank Act concerning the independence of compensation committees and compensation advisers of public companies with listed securities.

US CEO pay rose 11% in 2010
(Source: Business and Leadership) Chief executives in the US saw a significant jump in their pay last year as they received large bonuses for returning their companies to profit and growth. According to a study done for The Wall Street Journal the median value of salaries, bonuses and long-term incentive awards for CEOs of 350 major companies rose 11% to $9.3 million.

Boeing shareholders vote to review executive pay annually
(Source: Puget Sound Business Journal) Boeing shareholders approve of how much Boeing’s top executives are paid, but they want to exercise that oversight every year.  55 % of shareholders at the annual Boeing board meeting voted to review top executive pay annually, overriding the board recommendation for a three-year review.

Shareholders Mow Down Pay at Stanley Black & Decker
(Source: BNET) Stanley Black & Decker became the sixth company to lose a vote on executive compensation this year, and the first to get less than 40 % support from its shareholders.

Click the following links for the full alert and more information on Executive Compensation | CEO Pay and other ESG | Sustainability issues.