CEO compensation is never not a hot topic—among CEOs, anyway. For everyone else, it’s a subject that flares up periodically and sparks a heated debate that always concludes the same way: The system of CEO pay in U.S. companies is broken.
The criticisms are familiar: The system rewards the wrong things, ignores shareholder objections, relies on arcane financial machinations, focuses on short-term results, and insists on black-box opacity. It’s perpetuated by self-serving compensation consultants and crony board committees. It’s unconnected to actual company performance.
And, oh yes, CEO pay is too high—absurdly, obscenely high—whether compared to other countries’ practices or simply measured against common decency and fairness.
Boards and executives must take actions that answer at least some of the criticisms of today’s pay practices. And they should begin the process with an acknowledgment that the existing system is indeed seriously flawed—if not totally broken—and by examining whether their corporation is spending its compensation dollars wisely.
Author: Edward E. Lawler III
Source: The Conference Board Review
Subject: Corporate Governance