More Evidence that Executive Pay Practice Change is Starting

by Gary Larkin for The Conference Board – Governance Center Blog, May 10, 2011.

Now that two other major news organizations have confirmed it, I guess it can be proclaimed that indeed CEOs of American public companies received sizable compensation raises in 2010. In the past week, both the Associated Press andWall Street Journal reported that U.S. CEOs made more than $9 million (median) in 2010, a jump of more than 10 percent from 2009.

But the bigger takeaway from these reports, specifically that of the Wall Street Journal and the Hay Group, is that while executive pay is going up, a growing number of companies are dropping perquisites (perks) and more companies are aligning pay with performance. The Conference Board, which convened a task force on executive compensation in 2009, is pleased to see some progress on such issues because they represent two of the five guiding principles the task force established.

Those two principles from The Conference Board Task Force on Executive Compensation I am referring to are:

  • “Paying for the right things and paying for performance: It is critical that executive compensation programs link pay directly to results that help achieve the company’s business strategy, are consistent with the company’s values, and reflective of a risk profile that is appropriate in light of the company’s strategy and systemic considerations.
  • Avoid controversial pay practices: These pay practices, i.e. perks, generous severance agreements, excessive golden parachutes, tax gross-ups, golden coffins, should be avoided, except in limited circumstances where special justification exists. If used, the rationale for these practices should be clearly and plainly discloses to shareholders.” (continue reading… )

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