They’re just not worth that much
WASHINGTON ” Two-thirds of the people sitting on company boards believe executive pay has spurred strong performance, while less than a quarter of big investors draw that link, a report released Tuesday shows.
Both parties agree that lavish executive compensation has tarnished the image of corporate America, a resonant issue amid the widening scandal over the suspicious timing of stock options grants to top executives.
Among 50 company directors surveyed, 65 percent said they believe that U.S.-style executive pay and perks have contributed to company achievement. Only 22 percent of the 55 surveyed institutional investors ” such as pension funds, mutual funds and endowments ” took that view, according to the report by consulting firm Watson Wyatt Worldwide.
Nearly all the big investors believe that executives at most U.S. companies are overpaid and exert undue influence over how their pay is determined. By contrast, 61 percent of the directors said most executives are overpaid and 48 percent believe they wield too much influence over pay.
“Despite major reforms, executive pay and corporate governance continue to be a source of controversy,” Ira Kay, global director of compensation consulting for Watson Wyatt, said. “While the views of directors and institutional investors on executive pay issues are closely aligned in many areas, we found several differences between the groups, demonstrating that more work is needed on a few key issues.”
Irritation among company shareholders and the public over lavish executive pay continues. The Securities and Exchange Commission is expected to formally adopt this summer the biggest changes in rules governing disclosure of executive compensation since 1992. Public companies for the first time would be required to furnish tables in annual filings showing the total yearly compensation for their chief executive officers, chief financial officers and the next three highest-paid executives.
The true costs to the company bottom line of the executives’ pay packages, including stock options, would have to be spelled out.
At least 46 public companies are under investigation by the SEC or federal prosecutors for possible manipulation of options grants to increase their value to the recipients.