Executive Compensation

"Is Coverage of Executive Pay Overblown?” was the headline on a Forbes story in November—this in a year when the magazine published dozens of articles on the topic of CEO pay.

In that sense, you could say executive compensation isn’t newsworthy. There’s already been a glut of coverage from all kinds of outlets. But the story doesn’t die. Why is that?

For one thing, it’s about something as vital as making a living, not just for the C-suite inhabitants whose compensation is at issue, but for companies that need top talent to survive—what’s a keen and experienced mind worth when it keeps the lights on and customers coming? And likewise for employees, who have to wonder why their work is only worth, on average, 1/364th of what CEOs make these days, according to one report.

(It’s worth pondering the degree to which UnitedHealth’s Bill McGuire—once the highest-paid CEO in Minnesota with total compensation of $125 million in 2004 and stock options worth more than $1.6 billion when he resigned in 2006—was reviled not for the breaking of SEC rules, but for an income that breeched a collective sense of what’s fair or decent.)

Another thing is that designing and deploying compensation packages isn’t getting any easier. As Jason Williams of consultancy Organization Concepts International said in TCB’s January “What Business Thinks” feature on executive compensation, private companies struggle to construct packages that are competitive with what public companies can offer in terms of equity. Meanwhile, public companies are dealing with changed rules for stock-option expensing and reporting, and are beginning to rely less on options as an equity incentive.

What do you think about executive compensation?

What do top performers deserve? Should there be any limits? How can boards better safeguard their companies against pay for nonperformance? In a 2007 PricewaterhouseCoopers survey of corporate directors, 67 percent of directors said that boards of U.S. companies are having trouble controlling the size of CEO compensation. Is this a case of “we have met the enemy and he is us”?