The Conference Board says executive pay in the financial sector is out of whack with corporate performance, and this disconnect increases the risk executives will make decisions that enrich themselves and damage the long-term prospects of their firms.
Duh. The Conference Board is stating the obvious (though it has raised questions before, such as last year). And many of its provisions for risk management are so mealy-mouthed that it's hard to see them getting taken all that seriously. But the new report, "Overseeing Risk Management and Executive Compensation," (no link available) gets some teeth when it comes to looking directly at CEO pay. It all but asks corporate boards if they've been awake during compensation discussions, putting in damning statistics like ones showing that in 2008 the median salary of an S&P 500 CEO rose 20.5 percent from a year earlier, despite corporate revenue growth of a mere 2.8 percent. Among other things:
It calls (okay, it's the Conference Board, so it requests they consider) on boards to make sure compensation committees are staffed by people who understand all the aspects of corporate pay, including how executives can twist these to make themselves look better.It is good to see a corporate mouthpiece like the Conference Board is calling on companies to develop some spine when it comes to paying executives. Though not very direct, it's probably about as clarion a call as you're going to get from inside the machine to stop paying CEOs like they're sports stars, when they aren't.
It challenges (or rather, encourages independent judgment from) companies to step away from the practice of benchmarking, or paying every executive like they're the best-performer in the peer group.
It tells them not to act like chumps (that is, introduce accountability devices) for failed CEOs, by giving them fat severance packages and accelerated vesting.