Congress pecks away at CEO pay

Legislation would give shareholders a formal say in executives' compensation packages.

from the April 30, 2007 edition

Page 3 of 3

Page 1 | Page 2 | 3

To Frank, the pay levels undermine shareholder value and market confidence. So his bill should "further the workings of the capitalist system," in his view.

The Securities and Exchange Commission, which regulates the financial statements of corporations, has made it easier to assess all elements of executive compensation. Starting this year, it is requiring fuller disclosure in annual corporate proxies given to shareholders. The proxies now include, in one table, payments for pensions, deferred compensation, limousine service, etc.

Charles Peck, a compensation specialist with the Conference Board, a New York business research group, sees this as "a serious and sincere effort to make executive compensation more visible to shareholders and other readers of proxies." He describes the combination of the "say on pay" bill and the SEC disclosure provisions as "progress" in restraining CEO pay growth. But Mr. Peck doubts that either will significantly reduce the magnitude of CEO compensation. "No dramatic change," he says.

Nonetheless, a new study by ISS finds that a "say on pay" law introduced in Britain in 2003 is having a real impact on executive compensation in the island nation.

"Some British activists think it may mark the moment when British capitalism decided to stop converging with its American counterpart," the study notes. Several European countries and Australia have followed Britain's lead.

1 | 2 | Page 3