Moves afoot to curb CEO salaries

At a recent Saturday soccer game, Scott Klinger noted that the watching dads weren't griping about referee calls but about the pay of their companies' chief executive officers.

In the wake of corporate scandals such as the Enron affair, American workers have become more conscious of the huge gap between CEO pay and their own, says Mr. Klinger, co-director of Responsible Wealth, a group that is pushing to change a system that, he says, "violates the American sense of fairness."

The soccer-game angst is part of a growing backlash against top-executive salaries that now stand, by one measure, at 282 times average worker pay. It's an issue that often makes magazine covers - generally because CEO pay is rising. Now, although massive pay cuts aren't necessarily in the offing, there are signs of a downshift in corner-office perks:

• Last year, the average compensation of 365 top CEOs fell 33 percent to $7.4 million, the same level as in 1996, a survey by Business Week found. That largely reflects the decline in the value of stock options because of the weak stock market.

• Shareholder resolutions aimed at curbing CEO pay have tripled in this corporate annual-meeting season to 324 this year, up from 106 last year.

• At aluminum company Alcoa, 65 percent of shareholders backed a resolution taking aim at "golden parachutes," urging the board to submit to a shareholder vote any future severance arrangements that provide for benefits exceeding 2.99 times an executive's salary plus bonus.

Corporate boards are not required by law to follow such resolutions. But they may nonetheless impact board decision.

Such moves reflect not just public outrage - and a slower stock market - but also a desire by many institutional investors, such as pension-fund managers, to bring some restraint to the cost of CEO compensation.

The upshot is not a revolt against big paychecks, but a tapping on the brakes by the committees of corporate directors who typically set compensation. "Directors who cannot say no to excessive pay are not adequately representing the interest of the shareholders," argues Paul Hodgson, an analyst at The Corporate Library in Portland, Maine, a research group serving institutional investors and others.

Regulators, too, are involved in the renewed salary vigilance. Recently, the US Securities and Exchange Commission (SEC) began considering a tougher new rule that shareholders must approve stock compensation for all employees, officers, and directors. This would affect any plan providing stock or stock options to employees. Any material repricing of existing options to benefit executives and others would also need shareholder approval if the rule is made final by the SEC.

Already, some 200 companies of the 9,000-plus publicly traded companies in the nation have begun to voluntarily add to their expenses the cost of stock options granted executives and other employees. Those options, are a key source of the extraordinary compensation packages won by some executives in the stock market boom of the 1990s.

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