Page 663 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

648 The Complete Guide to Executive Compensation

Board of directors (stakeholder priorities)
Compensation Committee (independence of management)
Interest rates
Stakeholders
– Executive greed
– Employee alienation
– Customer concerns
– Suppliers’ future
– Shareholders’ return on investment
– Community interest
Rulemakers
– Congress
Corporate governance
Tax policy
– Regulators
IRS (interpretation of tax laws)
FASB (accounting changes)
SEC (disclosures and stock sales)
Stock market
– Movement in general
– Movement in own sector
– View of own company in sector

Table 11-5. Possible threats to executive pay

• Less emphasis on cash and more on equity
• More emphasis on stock awards and less on stock options
• Less emphasis on simple stock options and more on premium-priced and performance
grants
• More emphasis on plans pushed down the organization and less for executives only
• Less emphasis on financial measurements and more on nonfinancial goals
• More emphasis on performance versus peers and less on stand-alone results
• Less emphasis on period-ending results and more on compound averages
• More emphasis on stock retained less acquisition costs and less on ownership guidelines
It is hard to imagine executive pay continuing to significantly outpace that of persons at
lower organizational levels for any appreciable time in the future. There are various actions
that stakeholders and regulators can take to take some of the helium out of the pay balloon.
• Institutional investors may move their focus from the “how” to the “how much”
CEOs and others are paid, although that is not likely if they believe the “how” is
aligned with shareholder interest.
• Employees, if they are shareholders, may express their concern through resolutions,
although that is more likely to result in a public relations issue than a change in
practice
• Customers and suppliers are unlikely to have much impact.