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Out of Our Minds
Tuesday, January 17, 2006 1:47 PM
Executive Pay and Perks
Kevin Salwen on Money

The SEC voted today to force companies to begin disclosing more about executive pay. Perks will get more daylight, with the disclosure level of what is in there shrinking to $10,000 from $50,000. More reporting, supposedly in 'plain English,' will be coming too.

In my prior life as a Wall Street Journal reporter, I covered the last major executive pay disclosure overhaul by the SEC -- in that case, when shareholders were given the right to vote for the first time on exec pay shareholder resolutions. The result of the at-the-time hyped law: zero, nada, zilch.

In fact, exec pay has continued its ludicrous spiral -- and has even completely detached from performance. Truly mediocre CEOs (or worse) have been scooping up obscene amounts of money. Adequate (or worse) executives have snared tasty perks -- like former Delta CFO Michelle Burns' package that provides her with first-class seats for any flight even though she left the company in financial shambles.

And excess reigns supreme. Remember former GE CEO Jack Welch's retirement package? It included unlimited personal use of GE's planes, exclusive use of an $11 million apartment in New York City, a chauffeured limousine, a leased Mercedes, office space, financial services, bodyguard security and security systems for Welch's homes. All courtesy of the shareholders.

So what's the new law going to do? My bet: Zero, nada, zilch again. What's your guess?


Charles Rogers - 1/18/2006 10:25:01 AM
I guess what so much of the exec pay debate comes down to is where is the embarrassment line -- that is, the line where an exec says to himself 'that's crazy, I don't need that.' Most humans don't have that switch in their brains.

Exec compensation consultants get hired because they bring 'best practices' from other firms, which of course we know is a euphemism for excesses. After all, if the guy down the street does it, I'm entitled too, right?

Until we either get the embarrassment line crossed or corporate boards draw a firm line (not likely, btw, since no one wants to be first in holding the line on pay lest their guy be the first one to get 'screwed', I don't see this spiral being slowed.
martin - 1/18/2006 9:40:31 AM
I really like your thinking Grant. And, I hope for the same. But the cynic in me believes that there will be a handful of exceptions to the old rule, but more of the same for the rest of executive leadership.
Romeo Bravo - 1/17/2006 8:09:36 PM
Novel idea: Let's apply all these principles to Congress as well as any public corporation. After all, isn't Congress the world's largest spending public corporation?

I bet applying all these laws to Congress would shed quite a bit of light on what is going on there and make them understand what corporate America has to go through as well. Fair is fair in my book.

Grant Henninger - 1/17/2006 7:35:34 PM

I can't help but think that yours is a very negative view to take. Revealing more about executive benefits can't hurt. I agree that it likely isn't a miracle cure, but it is a step in the right direction.

The problem, as I see it, is that there are too many institutional investors controlling large parts of these companies, and they don't care about anything more than quarterly profits (at least for the companies they invest in).

This change that the SEC enacted today likely won't make a difference by itself, but it is another nudge that will hopefully help wake up individual investors so they may start paying attention to these things.


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