Contact l Sitemap

home industries issues reasearch weblog press

Home  » Issues » Executive Compensation

US: We are overpaid say executives

by Francesco GuerreraFinancial Times
October 15th, 2007

The findings - to be published today by the National Association of Corporate Directors - are likely to strengthen calls by investors and politicians, including George W. Bush, US president, for curbs on executive pay.

Senior executives' criticism of their peers' compensation levels could also encourage activist investors and hedge funds to target underperforming companies with highly-paid leaders at shareholder meetings.

Four out of six chief executives or company presidents polled by the NACD in July and August said the compensation of top executives was high, relative to their performance.

Only 2.2 per cent of the nearly 70 chief executives and presidents involved in the survey said compensation was too low, while a third deemed it "just right".

Their views were backed up by outside directors, with more than 80 per cent of them saying chief executives were overpaid.

"There is an overall realisation that executive compensation is an area that boards and management are struggling with," said Peter Gleason, chief operating officer of the NACD.

The issue is particularly sensitive because the gap between rich and poor in the US has reached its widest point in more than 60 years.

Figures released last week showed that the share of national income claimed by the wealthiest 1 per cent of Americans had reached 21.2 per cent, a postwar record, partly because of booming company profits.

Mr Bush told The Wall Street Journal last week that he thought some executive compensation was excessive. The president said some boards needed to improve their oversight of management and their pay.

Nearly 60 per cent of the directors polled by the NACD said the reason for excessive pay packages was the absence of objective ways to measure an executive's performance. Nearly half criticised the use of options and equity awards that reward executives when the company's share price goes up, rather than when its operations improve.

Investors have become more vocal in attacking what they often call "pay for failure" - big severance packages awarded to ousted chief executives such as Home Depot's Bob Nardelli, who has since joined Chrysler.




This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.