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The best way to rein in CEO pay

Getting CEO pay under control has been something of a sport over the past couple of years in Washington.

Salary caps, something most people associate more with major league sports than corporate America, were required of companies that received TARP money. Then there was the Dodd-Frank financial reform legislation passed last month, which gives shareholders the right to cheer or boo their CEO's compensation. There's even been a referee in the middle, with pay czar Kenneth Feinberg making calls on what's considered fair play.

But these tactics haven't done much so far to rein in outsized compensation. The caps only applied to a small number of firms. The new "say on pay" law may sound effective, but the votes will be nonbinding, meaning boards will be free to thumb their noses at investors. And it's not hard to see that while companies may have feared negative publicity, the government's pay czar had little power to put teeth in his reports.

I'd argue that the only way executive pay will ever be reined in is to have a say not just on what CEOs make but also on the boards who are making the decisions. Now that the SEC approved a rule Wednesday that makes it easier for shareholders to replace directors, investors may finally take a step toward winning that goal.

"Proxy access," as the approved change is called, refers to the right for shareholders to have access to the proxy, or the ballot on which investors vote at companies' annual meetings. Until now, company management would put their own slate of directors on the ballot, and investors could vote for or against each one. Even if a director got very few supportive votes from investors--a rarity--it was the board and management who got to choose who replaced him or her. Nominating their own candidates and funding a proxy contest was an extremely expensive and time-consuming proposition for shareholders, and only the most deep-pocketed investors took part.

Corporate groups are already mounting legal challenges to the new rule, and the U.S. Chamber of Commerce has said it would sue the SEC if it became appropriate. They claim that the new rule will result in management teams distracted by annual proxy battles and boards invaded by directors who promote short-term thinking and serve a minority of shareholders' needs.

That's highly unlikely. For one, no shareholder can nominate more than one-quarter of the board's seats. And not just anyone can add a name to the ballot: Only shareholders who own at least 3 percent of shares and have done so for at least three years will be protected by the new rules.

What the new rule will result in, however, is greater accountability for directors. Compensation committees--if they want to keep their jobs--will be under greater pressure to do away with golden parachutes and other lavish perks. Finally, entrenched board members who continue to pay CEOs for poor performance will be far more likely to be shown the door. Or tossed out of the game, as it were.

By Jena McGregor

 |  August 25, 2010; 7:41 PM ET |  Category:  CEO watch , Corporate leadership , Federal government leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Corporate groups are already mounting legal challenges to the new rule, and the U.S. Chamber of Commerce has said it would sue the SEC if it became appropriate. They claim that the new rule will result in management teams distracted by annual proxy battles and boards invaded by directors who promote short-term thinking and serve a minority of shareholders' needs.

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Oh wow this is funny. The Chamber is worried that companies will be run in the short term with no regard to overall company health because the board won't be able to choose all their friends?

Name me a single public company that doesn't have all their business decision revolve around the next quarter's numbers. A single company that sees mass layoffs as a detriment to a company rather than a positive. Go ahead.

Posted by: theobserver4 | August 30, 2010 2:19 PM

The Office of Personnel Management says federal employees on average make 22 percent less in salary than their private sector counterparts doing similar jobs.
Sheldon Friedman, the chairman of the Federal Prevailing Rate Advisory Committee, says the most recent data from the Bureau of Labor Statistics shows that when federal and non-federal occupations are compared by level of work and geographic distribution, the private sector makes more money"
http://www.federalnewsradio.com/?sid=2027170&nid=35
Posted by: twm1 | August 30, 2010 12:21 AM"

Oh, please, TWM1! You're laughable at best, a cynical trough-feeder at worst. Are you kidding? OMB? Federal News Radio? The leading arms, the advocates of maximum greed and piggishness of the Federal worker quotes below-private secor pay scales and benefits and we're supposed to believe THEM? Hilarious. Fine. But this is a free market. Do the 2.5% pay and benefit cuts every six months anyway. Federal "workers" will hang onto these jobs through 10-15 cycles of 2.5% paycuts until their fingernails fall off. Why? Because there ARE no private industry jobs that could make use of the average Federal worker's "brilliance" to begin with. We all know it. There oughtn't be ANY sacred right of the Federal worker to a lifetime job, unlimited security, pensions and benefits and ENDLESS summer vacations and snow days. It's a time of austerity and the American taxpayer is "fed" up with it, pardon the pun.

Attention is just starting to be paid to the greed of the Federal worker. It needs to be brought into a market discipline. As tax revenues fall (ergo, the prosperity of the American taxpayer) so to should the exhorbitant salaries paid Federal workers. And for these hawgs to quote OMB and Federal News Radio as a source for compensation parity is just idiotic. Again, there IS no parity from a talent level, 90% of Federal workers couldn't GO anywhere else. No one would have them.

Posted by: JamesChristian | August 30, 2010 1:27 AM

"The gap in income between the wealthiest Americans and all others has grown strikingly in recent decades, the CBO data show. In 1979, when the data begin, the average after-tax incomes of the top 1 percent of households were 7.9 times higher than those of the middle fifth of households. By 2007, top incomes were 23.9 times higher than those of the middle fifth — a more than tripling of the income gap."

"The top 1 percent paid a growing share of total taxes chiefly because they received a growing share of total before-tax income: 19.4 percent in 2007, compared to 17.8 percent in 2000. Indeed, the effective tax rate of the top 1 percent of households was lower in 2007 than in any year since 1990, demonstrating beyond a doubt that their tax burdens were decreased, not increased."

See

http://www.cbpp.org/cms/?fa=view&id=3220

Posted by: twm1 | August 30, 2010 12:32 AM

Pay levels in Federal Service are 2-2.5X private industry.Posted by: JamesChristian | August 29, 2010 10:06 PM

--

"The Office of Personnel Management says federal employees on average make 22 percent less in salary than their private sector counterparts doing similar jobs.

Sheldon Friedman, the chairman of the Federal Prevailing Rate Advisory Committee, says the most recent data from the Bureau of Labor Statistics shows that when federal and non-federal occupations are compared by level of work and geographic distribution, the private sector makes more money"

http://www.federalnewsradio.com/?sid=2027170&nid=35

Posted by: twm1 | August 30, 2010 12:21 AM

Awww, Jena Mc sez "Dodd-Frank financial reform legislation will help stop those big meanies on Wall St. who make sooo much money. There's even been a referee in the middle, with pay czar Kenneth Feinberg! Yayyyyy! That oughta hold 'em. Hahaha! Sheez, what sheer naivete! Or just incredibly blind?
Goldman Suchs owns both parties, and the criminals Dodd and Frank actually set up the system of Fannie/Freddie that destroyed the American middle class. Feinberg? "pay czar"? OMG! No one is that stupid. Feinberg is just someone brought in to make things look good for the sheep, fools.

Posted by: shred11 | August 29, 2010 11:27 PM

What is the purpose of "reigning in" CEO pay? This should be changed to, "what makes us think we have a right to determine the market value of another employee?"

To attempt to do so is either redistribution of wealth, an attempt at creating a socially progressive fair pay system which does not reward an individual for talent and productivity, or a vector for leveraging control of a system that completely goes against all market and capitalism based laws which allow our country to thrive.

Go ahead, try and change it. Watch what happens.

Posted by: wcc118 | August 29, 2010 11:04 PM

So does this mean that the bottom fish lawyers like John Edwards won't be able to build palatial estates off the backs of those that have to pay the rising medical costs? And that movie prices will go down for the average worker because of the outrageous excesses of movie stars compensation?

Posted by: jblast2000 | August 29, 2010 10:37 PM

Oh, please. If a CEO of a publicly-bailed corporation sticks with the sinking ship, give him his bonus. Where *I* want pay reined in is in the Federal workforce. Pay levels in Federal Service are 2-2.5X private industry.

How to accomplish it? Cut Federal salaries for all non-military and non-law enforcement 2.5% every six months. When these SO IMPORTANT and valuable Federal workers start leaving, work the ones that stay longer hours, but keep the 2.5% pay cut in place EVERY 6 months. THIS is what private industry does to get rid of dead, worthless wood and harden their workforces. Why in the world are lazy Federal workers entitled to a 40 hour workweek, snow days with pay and endless pay raises from the public trough in addition to benefits and retirement. There is no entity with more dead wood than the Federal workforce and I for one and fed up with the endless wail from these pigs that they need to catch up. Test them. Cut their pay. We can't afford these greedy, worthless do-nothings anymore.

Posted by: JamesChristian | August 29, 2010 10:06 PM

CEO or sports franchise players over paid.This articles weakness is that the players salary must be curbed- are they over paid? I may think so, as I think they over paid. Let us ask the players. It is the same as, any one demands high pay. It is then wrong. Our congressman or the President are paid when collectively perks are added.It is simply the supply and demand

Posted by: jayrkay | August 29, 2010 9:35 PM

You're all a bunch of price-control freaks. What's next, capping the supposedly overblown salaries of sports figures like Tiger Woods, A-Rod, and all the rest?

Sure are a lot of jealous people out there...

Posted by: wearedoomed1 | August 29, 2010 9:25 PM

I agree with the author; this is a good thing. Up until 1980, from everything I've found, top executive pay vs. the lowest paid at large companies held at a ratio of approximately 25-1. Since 1980 though, it rose precipitously to the level it's generally maintained for the last 12 years or so, 500 to 1! This is so unbelievably gluttonous of these executives and their agents, and also, corrosive to our society and morality.

If these were company founders, and if the company were privately owned, I think it would be different. But the overwhelming majority are employees working for publicly owned corporations; i.e. those of us with mutual funds are theoretically the "owners". I think this is definitely a role for our government to finally do something about this thoroughly abysmal, ultimate good 'ole boys and girls club. No one is worth what these jokers have conned out of the system. Their "productivity" derives largely from moving industry and employment to Red China, where there is no democracy, human rights, nor environmental laws and morality.

Posted by: Jakey2 | August 29, 2010 9:17 PM

What was that about a camel and the eye of a needle?

Posted by: jparete | August 29, 2010 9:02 PM

Yes CEO's get paid a lot of money in large corporation but the reality is that it's still a minute portion of the company's revenue.

For instance, Apple's revenue last quarter was 15.7 billion dollars. Someone earning 10 million a year would get 2.5 million for that quarter.

So their pay would eat up about .01% of the company's revenue for that quarter. This is hardly a number that the company or the shareholders are too concerned about paying if they think the CEO does a good job.

I think people just have a problem with other people making so much more money than them because even if you cut their salaries by a massive chunk, the pay for the rest of the employees given how many there are, would only increase by a fairly small amount.

I say either be content with what you make and live a happy life or work hard to get to where you want. Don't worry so much about what the others make.

Posted by: kanebrandon | August 29, 2010 8:54 PM

I see that there are many who are green with envy.

Posted by: sgilligan1 | August 29, 2010 7:38 PM

Surprisingly, in main stream economics, there has been no answer to the question: “What is the fairest distribution of wages in an organization in a free market under ideal conditions?”. Fair pay for a CEO, and other senior management, is a subset of this general question. It seems to me that this is such a fundamental question, it needs to be answered first before we can have a meaningful discussion about how this distribution might vary in the real world non-ideal free market.

In most physical sciences and engineering, one would typically start with such an understanding of an ideal system before attempting to generalize the result to non-ideal conditions. There are many such examples: Boyle’s law, Carnot Engine, Boltzmann’s distribution, etc.

Recently, a new intellectual framework has been proposed to address this crucial question. And not too surprisingly, the answer does not come from main stream economics, but from statistical thermodynamics and information theory. You may find a nice summary of this work in the Daily Kos column by Keith Pickering:

http://www.dailykos.com/story/2010/7/15/884566/-Adam-Smith,-Wal-Mart,-fairness,-and-CEO-pay

It turns out that the fairest distribution of wages is a lognormal distribution under ideal conditions. Empirical data show that this is followed, even in the real world free market, by the bottom 95% of the working people. That is, the free market seems to be working fine for the bottom 95% working stiffs. It is the top 5%, i.e. the senior management, where we have a run away situation where the free market has broken down.


Posted by: vvsmanian | August 29, 2010 6:37 PM

Why not increase the corporate tax rate for those companies who choose to compensate their executives incongruously. That would give the board an incentive to limit ridiculous salaries.

Posted by: maus92 | August 29, 2010 5:15 PM

Here's a simple way to reign in CEO pay.

Return to the tax rates of the Eisenhower administration. The most prosperous time in American history.

91 percent marginal rates on income tax. 3 percent rate on social security tax.

These rates to remain in effect until the National Debt is paid off. Every penny of it.

Don't cap it. Tax it.

Posted by: seattle_wa | August 29, 2010 4:27 PM

Call me crazy, as I am usually the most conservative right wing hawk on fiscal issues....

But, CEO compensation is so absurdly high, you can cap it without consequence... provided it is not capped "too much"....

So, just index it to the average wage of employees.

CEOs in japan make about 10-15x that of the average employee.

CEOs in the US average around 300x... so in the short term... we should pick 20 or so... to ensure we don't lose "our best talent" or whatever the counter argument.

Posted by: docwhocuts | August 29, 2010 2:55 PM

Who is John Galt?

Posted by: fugo | August 29, 2010 2:48 PM

Of course, except when a woman is a CEO; they then expect as much money as possible. The myopic and gender based hypocrisy of this article's argument is glaring.

Posted by: techresmgt | August 29, 2010 12:03 PM

To use a time-honored phrase of the left ... slippery slope!

Allowing government to control the pay levels of private business is a slippery slope that will come back to bite many of those who support this overreach.

Posted by: Hazmat77 | August 29, 2010 11:46 AM

I agree.

The corporations do not belong to the managers. They belong to the stock owners. Therefore, the stock owners ought to be to control who manages their property.

Posted by: Hellmut | August 29, 2010 11:24 AM


"I'd argue that the only way executive pay will ever be reined in is to have a say not just on what CEOs make but also on the boards who are making the decisions."

This makes good sense.

Posted by: abrahamhab1 | August 29, 2010 10:58 AM

Hey, Jena, CEO pay isn't coming off of the backs of taxpayers. As long as the company is solvent, making a profit and shareholders are happy what's it matter
unless whipping up class envy was your objective.

Posted by: onecent100 | August 29, 2010 10:04 AM

Gigi- can't deny that you have a point.

Just remember it, and don't go crying glass ceiling later.


Posted by: BEEPEE | August 29, 2010 10:04 AM

gigi11, tell that to the millions of college-educated Americans now without jobs or struggling to just get by on jobs that grossly under pay with no health insurance plan or the health insurance plans that costs them fifteen percent or more of their meager wages, depending on how many dependents they must insure. And if you truly believe that privatization of every public service sector devoid of unionized labor and according to the free market model is the way to go, then you need to go back and brush up yourself on the origin of American labor union, along with the origin of Great Depression.

Posted by: TalkingHead1 | August 29, 2010 8:56 AM

did they control the pay of the ceo of wapo...
the pay of the ceo's of those black churches...
did anyone get a raise or a price cut by slashing the ceo pay...

Posted by: DwightCollins | August 29, 2010 8:49 AM

If the company is a publicly traded corporation,then the government should have the right to control CEO's, et al, compensation levels. As for restricting him/her from holding Chairman and CEO positions on the board, that's a start. Problem is, the board members are all from one Ivey School MBA program or another, and they cover each others behinds and prop up the absurd salaries - while penny pinching the daily workers.

Posted by: DavidinDallas | August 29, 2010 8:33 AM

What is wrong with everyone? Get a degree, climb the coporate ladder, go to Hollywood, play professional sports, be Oprah or MYOB. If you want a piece of that pie, go get it. These CEOs and business owners don't owe us squat. If you are of the opinion that they do, then you had better watch out for the American working at McDonalds who thinks your secretarial pay is way too excessive. It's public sector employees who are driving this nation into bankruptcy. They now make more than double what we make in the real world and we pay for it. Wake up and smell the duplicity. There's a reason why less than 20% of private business is unionized. The private sector has finally gotten wise to the tedious, un-romantic "workers of the world unite" nonsense and we are having none of it. Big Labor, the single largest corporate structure in the nation, has taken over public "service" jobs and they will, indeed, be the death of the free market system they plunder for their overinflated salary and benefits packages, again, at our expense.

Posted by: gigi11 | August 29, 2010 7:17 AM

Get CEO pay under control?!?!?!
Whose control??
Jena you look like an intern. Give me some reason to give you credibiity please.
And Eco 101 won't do it!

Posted by: thornegp2626 | August 29, 2010 7:12 AM

these was obama's big triumph...
controlling ceo pay...
yet the price of food and other necesities continue to rise...
and it should as a lesson to everyone...

Posted by: DwightCollins | August 29, 2010 5:39 AM

First, the real battle is corporate governance, not executive compensation. Second, corporations do not exist in nature. They were created by the government. With the exception of a few corporations created by the British crown with a royal grant of monopoly in the crown colonies, like the British East India Company, corporations did not exist at the time of the Declaration of Independence. The Declaration of Independence and the U.S. Constitution say absolutely nothing about corporations. Modern corporations were created by legal act of governments, beginning in the 19th century, well after the Declaration of Independence and the U.S.Constitution. Third, even philosophical libertarians and defenders of private property rights readily acknowledge that the government's role ought to be to act as the UMPIRE. So..., here's the RIGHT CALL by the umpire: Corporations are owned by the shareholders, not the managers (the CEO and the directors). The managers are supposed to work for the shareholders, not for themselves, and are supposed to use corporate resources (like money and records) for the benefit of the owners, not for their own benefit. The shareholders ought to chose the managers. So, when it comes time every year to choose managers for the coming year, the current managers ought not be able to chose themselves or their pals as the new managers. Instead, when corporate records of shareholder names and addresses and tens of millions of dollars of corporate funds are used for the "proxy solicitation" process for shareholder votes for election of corporate directors, ALL shareholders ought to be able to put names of candidates for director onto the "company's" proxy solicitation. The WRONG CALL by the umpire has been to allow the current managers to be able to use corporate records of names and addresses of shareholders and tens of millions of dollars of corporate funds for a supposed "company" proxy solicitation which lists only the current directors or other pals of the CEO as the choices for directors for the coming year. The new rule buy the SEC (the umpire) is the right call: it will grant "proxy access" to the real owners of the corporation (the shareholders, not the CEO and his toadie directors).

Posted by: samfinn | August 29, 2010 5:15 AM

" its a club...a corrupt little club"

That's exactly what it is, an elite little club where all the members watch each others backs. A club member gets fired from one place, and his buddies get him in somewhere else.

That being said, I'm not so sure that the gov't setting salaries for executives is a good thing, and probably isn't legal.

If the gov't\taxpayers bailed out a company like GM, AIG, etc., then yes, the gov't should have a say in exec compensation, at least until the loans are paid off. Said companies should also receive a stern warning that we bailed their butts out once, but it won't happen again.

Maybe another idea would work. Instead of the gov't dictating exec pay, go the other direction. No gov't contracts for companies where the CEO makes more than X times the average worker.

Not a lawyer, so I don't know if that would withstand a legal challenge or not. But, if shareholders\BOD's can set what execs make, I don't see why the gov't can't stipulate who they do business with.

"...they've had to eat a lot of you know what on the way to the top."

Well, if they are eating a lot of you know what on the way up, they must have there noses up the you know what of the people above them.

Posted by: BEEPEE | August 29, 2010 3:48 AM

We should reign in YOUR pay! We think you make too much money compared to the waitress who serves you at your favorite restaurant.

In reality, what some CEO makes is NONE OF YOUR D*** BUSINESS.

Posted by: jhughart | August 29, 2010 12:18 AM

CEO pay? How about jobs Jena? How about lower corporate tax rates and less government interference.....less forms, less reports, less bureacracies auditing.

Jena got a hot topic and is running with it....but Jena, run with something that benefits all of us.

Posted by: Jimpol | August 29, 2010 12:12 AM

Newsflash. If it is not your business, and you are not a stock holder, you have no moral standing to set compensation caps ... Let me strees again ... on a business that is not yours. Period.

Posted by: madhtr | August 28, 2010 10:48 PM

God almighty, what country am I in? Since when is it up to anyone other than a company's stockholders (read: OWNERS)to determine what said company's CEO should make? What the hell business is it of Washington's, or Jena McGregor's, or the Easter Bunny's what XYZ Corp.'s CEO makes?

Know what Jena? I have no idea what you make, but I thinks it's probably too much. How about that? I DEMAND that your salary be cut and you MUST answer to me, because I think you're overpaid!! And I don't even own WaPo stock.

If you think CEO's are overpaid, may I kindly suggest you purchase some stock, attend an annual meeting or otherwise air your complaints and do something about it the tried and true way. Otherwise, quit your whining.

Posted by: causeisaidso | August 28, 2010 10:39 PM


Here is a timely article on runaway executive compensation. Before one chants "Free markets, free markets", one has to ask - What happens if the free market does not work for the top 5% of the wage earners?

http://toomuchonline.org/a-thermodynamic-take-on-executive-pay/

Posted by: blueeastindian | August 28, 2010 10:13 PM

I think salaries, with no exceptions and no loopholes, above some obscene amount of money, say, a million dollars a year, should be taxed at the same marginal rate as existed during the Administration of that known Communist/Socialist/Fascist, Dwight David Eisenhower, and that business deductions for salaries above the same obscene level should be prohibited. That might help keep executive salaries more in line with reality.

Posted by: ejs2 | August 28, 2010 9:09 PM

I think we should tax all income above some obscenely high level at the same marginal rate as existed during the Administration of that known Communist/Socialist/Fascist, Dwight D. Eisenhower and we should not permit tax deductions for wages above some obscenely high level. Thatg might keep some of these ridiculous salaries more in line with reality.

Posted by: ejs2 | August 28, 2010 9:04 PM

The government has absolutely no right to stick their noses in a private institutions pay structure. The government is getting out of control. The only instance that the government should be able to make any decisions is when a government has bailed out a company, however once the money is paid back the government can not continue to meddle.

Posted by: Jsuf | August 28, 2010 7:44 PM

"....when you get through "reining in" the pay of people who drive this nation's economy, go to work on the pay of communist and anarchist Hollywood actors and CBS Evening News Anchors?"

Sure when I think of CEOs driving this nation's economy I think of.."Llyod Blankfien, Ken Lay, Martin Sullivan of AIG and going futher back Charles Keating. Right! Once again the bogey of Communism when all we are asking is more power to the shareholder.

Posted by: fairplayer1 | August 28, 2010 6:22 PM

Jena, darlin' be a good girl and when you get through "reining in" the pay of people who drive this nation's economy, go to work on the pay of communist and anarchist Hollywood actors and CBS Evening News Anchors? Will you do that for us, dear?

Posted by: chatard | August 28, 2010 5:11 PM

For those who are bringing in the specter of the Government or worse this administration stepping in to rein in executive pay, please stop spreading falsehoods and unfounded fear. The question has always been how do the shareholders get to have a say in setting fair compensation for the CEO. Today they hardly have a say.

Posted by: fairplayer1 | August 28, 2010 3:21 PM

Why not just take over all private companies in this country if you really think Big Government knows best? Somehow big union bosses with big expense accounts and paychecks are exempt ... oh yeah, they're friends of politicians so they get a free pass.

Posted by: legitbrownie | August 28, 2010 1:25 PM

I find it repugnant that in a capitalistic, free market system that the government would set the pay of someone in private industry.

Posted by: 0460 | August 28, 2010 12:46 PM

Frankly it is none of your damn business what a CEO makes unless you are a shareholder.

Posted by: thegriffer | August 28, 2010 7:38 AM

any salary over $1,000,000 should be taxed at 90%. If you make that much money you are doing it for sports, not because you need it and not because you deserve it.

Posted by: smokberry2002@yahoo.com | August 28, 2010 4:50 AM

In the 1950s, when this country's economy grew at a terrific pace, the average CEO made something like 100 times what the average employee made.

The same was true in Japan until fairly late in the last century.

The lesson does seem to be that diverting a company's monies from its own needs and those of their employees to the greed of its senior executives is a losing proposition.

Would proxy access change this? No.

Decency and shame would, but corporate Winners don't indulge in that.

Posted by: thmas | August 27, 2010 11:24 PM

If you believe that CEOs are paid fairly for jobs well-done, I have this wonderful MLB pitcher named Strasburg that you can have for 2011 for only $20 million.

Posted by: angelos_peter | August 27, 2010 11:07 PM

I find it humorous to hear people say that CEO compensation is mostly in stock. According to them this makes decisions pure and honest. However, does this not make for manipulation to increase stock value. Outsourcing jobs for cheap labor will also increase profit and therefore stock value. Next time you think stock options as pay make for good business practices think ENRON.

Posted by: wcsmith129 | August 27, 2010 10:56 PM

Please don't let this administration water down the level of competition in this country. The very top of every scale is compensated at levels that seem to reach excess.....

That's what pushes all of us to go farther. It's called the AMERICAN DREAM.

Posted by: bschaper | August 27, 2010 9:25 PM

Don't allow the CEO to also be the Chairman of the Board - its like the Fox guarding the hen house.

Posted by: Pebble1776 | August 27, 2010 9:21 PM

The right wing loves to deride unions... complaining that they are responsible for all the economic ills...But at 7% union in this country, that claim is unfounded...
Now CEO's... my company got rid of the CEO due to poor performance and because of his incompetance... he got 5M to go away...If CEO compensaion is not a scam... I don't know what is... its a club...a corrupt little club... they are wildly overpaid and because they have access to politicians, they get the policies they want. They should be limited to 60X their lowest paid worker. Enough... nobody is worth what these people get paid.

Posted by: dwdave67 | August 27, 2010 8:55 PM

They need to focus on the federal government workers salaries which are far in excess of the public section..the federal government workers benefits are three times greater than the private section..our government is always protecting the fed workers and trying to put private businesses out of business.

Posted by: tonyjm | August 27, 2010 7:49 PM

The same logic that applies to gross CEO / athlete / actor salaries should also apply to dictators shouldn't it? Aren't dictators political stars, who ruthlessly destroy their opposition?

I also think the evidence is lacking that CEOs capabilities are that much superior to many in other fields who make a lot less, yet contribute just as much to society.

Posted by: samsara15 | August 27, 2010 7:32 PM

for a grownup assessment of this new SEC rule, see Paul Atkins' opinion piece in today's WSJ.

Posted by: TomGough2 | August 27, 2010 7:00 PM

Tying in accountability and performance to CEO pay would be a start. I think the proper ratio is 40 to 1 - highest to lowest pay. Making sure that a good part of the compensation is stock that they can't cash in for 5 years is another. Any financial shenanigans and creative accounting negates the stock options. If they don't do the job, fire them. That's how the rest of us worker bees are treated.

Posted by: MichelleKinPA | August 27, 2010 6:36 PM

Lop off their heads with a dull hacksaw blade?

Posted by: deepthroat21 | August 27, 2010 6:33 PM

I'd like to congratulate cash-less's wife for winning the CEO lottery. But, she freely chose to make those sacrifices. No one forced her to do it. And, in the past, many other people made the same sacrifices for a lot less money. Even when the top tax rate was 90%. There will never be a shortage of people who want to become CEOs regardless of pay. It's an ego thing.

To some of the posters who try to make CEO pay a current administration issue or somehow try to tie it to some kind of socialist leanings, it's not. I know many very conservative employees at my
company who feel that CEOs are over paid. After all, many of these
people end up having fairly short tenures with their companies and
when they are forced to leave, they generally leave with very generous
severance packages. I don't mind paying people for success, but I do mind paying them for failure. So don't tell me that this is an issue for
the right or the left. It's a fairness issue. While most of us are held to
standards where we're shown the door for poor results, here's a group
of people who seem to be rewarded for it. That's why most of us are
upset, not some ideoligical viewpoint.


Posted by: tedma | August 27, 2010 6:26 PM

The ratio of highest paid to the lowest in corporate America in 1992 was around 40. This number stood at close to 300 just before the financial crisis hit. While CEOs populating each others Boards play a huge role in this, there is another major factor i.e. bringing in the Prima Donnas from the movie and sports world into the Corporate world. We create a cult around personalities, at least in a public company there cannot be one person who is responsible for the success or the failure beyond a certain point. There is always a #2 or #3 waiting and along with many others contributing. If that was not the case the stock markets will have zero confidence in a company. I remember reading Tom Peters 'In search of Excellence' in the late eighties. By year 2000 most of the companies mentioned highly in it were gone. However linking CEO pay to long term performance is the way. You cannot have people like Llyod Blankfein walking away with $78M and the next year the company is doldrums. Then they have the nerve to ask for bonus which by definition is discretionary.

Posted by: fairplayer1 | August 27, 2010 6:12 PM

Corporate executives should not be part of the board of directors. Separate the functions. Let neutral third parties set executive salaries.

Posted by: samsara15 | August 27, 2010 5:12 PM

I used to be one of the people who thought corporate compensation was out of line across the board. Now, after having watched my wife essentially give up most of her life to climb to the top, I think that except in the most egregious cases CEO's and other top corporate managers have earned every penny. For most people looking up from the bottom, it seems totally unfair, but 99.9% of all people do not possess the skills to get to the top. So, you're just complaining/angry because they have more than you do. Stop complaining. Sour grapes. The playing field is generally level. You have the same chance anyone else does. It's what you do with that chance that counts. And more importantly, they are doing something you cannot! They are, simply put, generally more capable than you. Enjoy your job, your children, and your life. Let those at the top eat cake...they've had to eat a lot of you know what on the way to the top.

Posted by: cash-less | August 27, 2010 4:25 PM

Let's take a look at just today's news: US Banks with ties to the Mexican drug cartels. money laundering, and a whole host of other crimes: CITIGROUP, JP Morgan, Wells Fargo, Bank Of America, American Express. (http://www.thestreet.com/story/10840781/1/mexican-violence-spills-into-us-banking.html?puc=outbrain&puc=outbrain&cm_ven=outbrain&obref=obnetwork)

Oh, and CITI and JP Morgan have dumped the US dollar in favor of the China's currency for the bonds and trades. Several US banks and investment firms have moved their executive staffs, traders, and headquarters to Hong Kong and those executives are renouncing their US citizenship and buying "permanent residency" permits! All of this is detailed in an article in the Financial Times Of London.

It isn't a mistake that the CEO's and executives of these outfits are among the most commonly mentioned abusers of excessive compensation. They're CROOKS! So, treat them like crooks. Arrest them, try them for treason, and hang them! White collar crime and economic treason are no less crimes. A corner store robber is motivated purely by money, too. The only difference between a street thug and the CEO's of these corporations is the clothing. Excess compensation ought to be a flag that triggers and automatic investigation and arrest.

Posted by: mibrooks27 | August 27, 2010 4:07 PM

The government should not be involved in what CEO's make. If the shareholders would pay attention then they could do something about CEO conpensation. Lets quite going down the socialists path and get back to a free enterprize system.

Posted by: kdelo545 | August 27, 2010 4:07 PM

our revolution was started to take away regulation and to maximize our profits..we need another revolution a la french to put regulations in place and to butcher royalty..ie.. CEOs and the filthy rich

Posted by: kiler616 | August 27, 2010 3:54 PM

CEO's claim they're worth their high pay because of the shareholder value they create. It's reasonable to think that the value should be real (long-term) not just a short-term blip caused by doing something that boosts profits temporarily at the cost of long-term damage to the company. So how about this. CEOs get paid a relatively modest base salary. All other compensation would come in the form of stock options. The options granted in year X would be exercisable 20% per year over a period of 5 years. If the CEO is really doing great stuff, he or she will benefit. If he/she is driving the company into the ground, that will be reflected in compensation also. And no, I don't think this should be legislated, but if the board were truly acting for the benefit of shareholders, this or something like it would make sense.

Posted by: wtyler | August 27, 2010 3:00 PM

The level of ignorance of real senior executive pay is astounding. Lets reign in Reporter pay since they have no skin in the game about getting it right.

Over 70% of the average CEO pay is in stock and that is usually in options meaning the stock will only have value if the value of stock goes up over time. The executive generally only gets access to the stock over a 4 year period. So at any point in time, they always still have 4 years of unvested equity. So if the stock tanks, they lose more than the average investor. The reporting on Executive Pay has been totally irresponsible and feeds half truths and cooked numbers on a regular basis.

I am at a loss as to why there is such angst about CEO pay. A CEO is responsible to the shareholder and employees. If he/she doesn't do the job right, a lot of people suffer. It is for this reason that the average tenure of a public company CEO is under 4 years (a fact the Post will never report of course). So lets compare their pay to a professional athelete who makes multiples of the average CEO. Also why is CEO pay too much but no one has a problem with Oprah makine $200 million a year?

Posted by: slainte1 | August 27, 2010 2:54 PM

In my old company, a "Senior Management Compensation Committee" would gather and group CEO compensation for like sized companies, then declare our CEO was worth MORE because of the fine job he did under adverse conditions, experience, despite the bad economy, etc. The Board of Directors, who had ties to these like sized companies, would approve the higher compensation, and pat themselves on the back. Then their Compensation Committees would recompute their compensation based on the higher amount they just voted in.

Meanwhile, lower level jobs would be out sourced, off shored or eliminated - and the work and responsibilities shared out to the remaining workers for little or no additional compensation.

Two different worlds...

Posted by: shadowmagician | August 27, 2010 2:49 PM

Someone should start a Wikipedia-type website for all publically traded companies and their board members. All the earnings, benefits and compensation information is available to the public. It would also be nice for them to divide up what percentage the CEO, Executives and Directors are compensated as a percentage of net profit and translate that to a per share expense. Something like that might make investors scream.
The site could have each board member, their compensation, all the boards they sit on and with whom they sit on each of those boards.

Posted by: DGSPAMMAIL | August 27, 2010 1:43 PM

The problem is that CEO A is on the board of Company B, C, and D. CEO B is on the board of Company A, C, and D. And so on. They set each others' salaries, winking at each other. Salary caps need to be put in place, say max salary = 20x min salary, with 1000 pages of accompanying text to take care of all the loopholes, dodges, tax havens, etc., that will inevitably come.

Boy, I wish I could be on a committee with three friends so we could all set our own salaries!

Posted by: risandy | August 27, 2010 12:42 PM

Hahahahahahahahahahahahahahahaah.

You bet. Change we can believe in!

Let's I just cut your paycheck, can you donate to my campaign? You betcha!

Congress is bought and paid for. They can't live the life they aspire to with lobbyist $$ and hidden perks.

Taxpayers are suckers. No change here.

Posted by: wesatch | August 27, 2010 11:56 AM

No CEO, VIP'S deserve to get payed such absorbant pay. This is large part that ruined many American Corporate Companies, just ran amuck laughing all the way to the bank. They should have to pay back an if they spent it all. Then sell their mansions an twin suvs, boats an mercedes benz. What ever riches they aquired while stealing money.

Posted by: JWTX | August 27, 2010 10:57 AM

Why all this agony and wasted motion over something that is absolutely no concern of yours? Just have our Great Leader sign an Executive Order limiting pay of all executives at all companies to a fixed multiple of the lowest paid person. It's completely unconstitutional, of course, but so was the so-called "Pay Czar." Just bank on no court challenges for a year or so, then even after the court challenge, figrue it would take five years for the Supremes to finally throw it out.

All I know is that from this point forward, I'll be paying a lot more attention to proxies than I have in the past. There is NO WAY I want any company I have invested in being run, in any fashion, by so called "social justice" types, Greenpeacers, or even many of the posters on this blog. You see, I am interested in actual getting a return on the capital I invest.

BTW, all you social do gooders, how about turning your magnifying glass on some of the 501(c)3 rackets out there. Why should any of those execs travel first class, or be paid more than $200K?

Posted by: Curmudgeon10 | August 27, 2010 10:11 AM

Ultimately, the proxy access rules and the opinion of Ms. MacGregor, while well intentioned, will have little effect on CEO compensation. As long as public companies are competing for the best talent with private companies, private equity, venture capital, Wall Street firms and non-US based companies, many of which have few compensation disclosure obligaations or restrictions, the market will continue to dictate the pay scale. If I am a 45-55 year old successful excutive with a track record of financial performance and increasing shareholder value, and my options are to run GM where I will be paid less and deal with the stress of public scrutiny, or as an a example, run Koch Industries, the largest private company in the US, or a private equity owned-company and be paid for my performance, which may be in the tens of millions, where do you think I should go? Only if I am older, have made my fortune, and want to leave a legacy will I accept the GM job.

If the intent is to cap the pay of public company executives, then that should be clearly stated by regulation, rather than this "beat around the bush" effort to put directors on boards whose stated intent is to pay people less - until they figure out they can't attract some of the best leaders because they are priced out of the market.

The extremely high compensation of the Occidental executives is not the norm and unreasonable, but it will be interesting to see if that company will maintain its enviable record of total shareholder return when they bring in a lower-paid CEO.

Posted by: booboola7896 | August 27, 2010 9:36 AM

"The best way to rein in CEO pay"?

Tax it away!
50% tax on income over $1M/yr
75% tax on income over $10M/yr
90% tax on income over $100M in one year.

Posted by: chucky-el | August 27, 2010 9:30 AM

"The best way to rein in CEO pay"?

How about this . . . ..FIRE THEM!!!!! Their pay and all their associated 'benefits' costs the company multi-million dollars (some as much as $100 million+) every year for some old geezer who most of the working employees have never seen in person. (same applies to women, but most of the time corporate CEO's are older men) The old geezer thinks he's too good, too self-important to talk to the regular folks whose hard work make his excessive salary possible.

A lot of companies would never know their CEO is gone, and the company is probably better off without him.

Posted by: momof20yo | August 27, 2010 7:26 AM

Let's see, last time I checked, Don Graham owned 17% of the Washington Post, worth a half a billion dollars or so. (Used to a billion, but he's not really hurting.)

Anybody think that's excessive?

Posted by: dhartmanva | August 27, 2010 6:02 AM

When the premise of the very question is wrong, how can the right answers emerge?

The question the BOD should frame, is CEO accountability, innovation progress, employee skills and continuous improvement, and global growth and parity of pay for performance. Reducing pay is less important that the overall health of the company.

The BOD need to hold the CEO responsible for sustainable success of the company, employees, and investors.

Rajeev Rawat, Sunnyvale, CA

Posted by: rajeevrawat | August 27, 2010 5:08 AM

This is weird. Have "Free Markets" discovered "Democracy" ? I think I'll not bet the family farm, thanks.

These heretofore undiscovered theoretical "pressures" which will sway a secretive (results disclosed at the end) process seem more to me as playing for time.

The US holds elections well after the last, and well before the next, State of the Union Address. A cynic might say that it helps keep the opportunity for revolt (by ballot box or from discontent) separate. Annual Meetings, in contrast, can be highly scripted affairs, for exactly the same reason.

Posted by: gannon_dick | August 26, 2010 9:08 PM

I am not a big fan of CEO'S but how about the Evil movie stars making millions or the Evil athletes making millions or even Oprah or the ladies on the view. Listen to this Government and we are to despise and hate these people, they are taking food right out of our mouths. I think some sorry ass losers need to get a life. This Country used to be the land of opportunity,now it is the land of hand outs fo votes. Why not let the World in and we can all starve together. ( Congress, Senate and the administration excluded of course.) They are Elite !!!!

Posted by: sambird | August 26, 2010 3:12 PM

The best and most untried way to rein in CEO pay will not come through more rule making. It will happen when more board members model the appropriate leadership behaviors while rejecting rigged peer-to-peer group comparisons that fuel current compensation models. The pay complex is unlike any other. Impervious to change, fueled by special interest and lacking in leadership as evidenced by the recent H-P fiasco. Come to to think of it. The current pay/governance model mirrors another austere body right down the road from the Post.

Posted by: jgarlington | August 26, 2010 2:24 PM

Why not just tax the excess above a certain amount? Say $2 million a year total compensation and everything above that amount gets taxed at oh 90%. That should reduce our national deficit and refill the treasury quickly. CEO salaries are obscene. How many workers could be hired/kept if CEO salaries were to be reigned in.

Posted by: Desertdiva1 | August 26, 2010 12:21 PM

I support the new SEC proxy-access rule. Yes, it may result in some boards and management being disturbed by those pesky investors. However, the ruling is quite restrained. Also, many institutional investors who sit on boards will remain supportive of management because they do business with the firm -- e.g., managing their retirement funds.

Posted by: CJSmith78 | August 26, 2010 12:00 PM

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