Volume 18, No. 14

 

(R) Looking For Truth About High Executive Pay: An S&P 500 Survey:  There’s no shortage of emotional reactions on the subject of executive compensation. With the events of the past couple years fresh in the memories of investors and the general populace, executive paychecks and bonuses have been popular outlets for their rage. The focus of attention is usually on absolute pay levels, which seem absurdly high - especially in the financial sector. It’s hard to justify bonuses denominated in millions of dollars for executives whose minions came perilously close to blowing up the entire financial system, making themselves obvious targets for politicians currying favor with an angry electorate. Examined in absolute terms, executives will always appear overpaid: their paychecks are bound to be bigger than the ones of those doing the examining, so the envy factor will color judgment. Yet it may also be correct. The picture of compensation is seriously incomplete: proxy statements report the total compensation of only the top five officers, while the financial statements provide information about only the stock compensation provided to the entire employee population. Even within those constraints, investors can get a tighter grip on the fairness of executive compensation. Comparison of executive compensation to the kinds of investment spending that produces shareholder returns provides even more insight into pay fairness.

Comments are closed.

Powered by WordPress. Designed by WooThemes