Friday, October 13, 2006
It Isn't Going Away
Recently we had a company call us about a problem related to CEO compensation. A reporter was relentlessly pursuing "excessive CEO compensation." The company saw the issue as a spot crisis -- i.e., how do we make the reporter go away? The problem is the reporter isn't going away, nor is the issue of CEO compensation. It's a continuing crisis. Like it or not, major publishers of financial news in the US have concluded CEOs are over-compensated. They are going to crusade against CEO compensation until something is done at the board level or by Congress.
I'm not writing to take a position one way or the other. I am alerting practitioners who think the issue will go away sooner or later. It isn't going away. Pressure on boards and on CEOs has been building for years. No answer a CEO can give will satisfy critics other than slashing pay.
This has created an odd illogic in American culture. On the one hand, athletes, entrepreneurs and entertainers can take down huge salaries, but on the other, CEOs of public companies cannot. Arguments comparing the groups are useless because reporters aren't interested. There appears to be a belief that a number of individuals can run a public company, and boards only need to negotiate for a less expensive one.
It is unclear how this crusade is going to turn out. There have been abuses and those are coming to light -- especially backdating of stock options. Each incident fuels further anger and convinces reporters they are on the right track.
I'm not writing to take a position one way or the other. I am alerting practitioners who think the issue will go away sooner or later. It isn't going away. Pressure on boards and on CEOs has been building for years. No answer a CEO can give will satisfy critics other than slashing pay.
This has created an odd illogic in American culture. On the one hand, athletes, entrepreneurs and entertainers can take down huge salaries, but on the other, CEOs of public companies cannot. Arguments comparing the groups are useless because reporters aren't interested. There appears to be a belief that a number of individuals can run a public company, and boards only need to negotiate for a less expensive one.
It is unclear how this crusade is going to turn out. There have been abuses and those are coming to light -- especially backdating of stock options. Each incident fuels further anger and convinces reporters they are on the right track.
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