Just a sign of falling stock prices, or an indication of the greater socialisation of finance capitalism? After all even these CEO's are workers. It is probably not so much their salary bill but the damage this does to the global image of the companies that might lead them to think again.
Chris Burford
London
FT
>Argument for top pay is 'hooey' By Simon Targett and Tony Tassell
>Financial Times; Jun 24, 2002
>
>Leading institutional investors have concluded that there is no real
>international market for top business executives, throwing doubt on one of
>the main arguments used by companies to justify huge boardroom pay packets.
>
>The International CorporateGovernance Network, whose members control
>$10,000bn (ý6,677bn) of assets, is set to publish a new report questioning
>why executives' salary, bonus and share options packages are being
>structured to stop them being poached by overseas competitors.
>
>"That is so much hooey," said Alastair Ross Goobey, chairman of an ICGN
>committee that has drawn up new corporate governance standards, and a
>former chief executive of fund manager Hermes. Many companies rely on
>international comparisons when setting bosses pay - last week
>telecommunications group Vodafone cited the need to "retain and motivate"
>executives when giving out details of a multi-million pound package for
>its chief executive, Sir Christopher Gent.
>
>The report comes amid heightened awareness about executive pay among
>companies, investors, government and staff, with the ICGN conceding that
>it has been rising much faster than average earnings in all advanced
>economies. "We cannot ignore the societal impact of what seems to be
>unfair or disproportionate rewards being received," the report states.
>
>The ICGN, which is expected to approve the report at its annual summit in
>Milan next month, was formed in 1995 and is backed by some of the world's
>most influential and activist investors. These include institutional
>investors such as Calpers, Capital Group, Fidelity, Hermes Pensions
>Management, TIAA-CREF, and Barclays Global Investors. It also includes
>representative bodies such as the Association of British Insurers and the
>Council of Institutional Investors in the US.
>
>The investors seem likely to use the report to form a new set of best
>practice guidelines that companies will be "encouraged" to follow.
>
>The ICGN claims that a post-Enron consensus is emerging among investors
>and companies about tackling directors' pay. "The only good thing to come
>out of the Enron affair is that people are realising there is something
>broken in the system," Mr Ross Goobey said in an interview with FTfm, the
>FT's weekly fund management supplement.
>
>The report will also make clear that transaction bonuses are no longer
>acceptable. They offer "perverse incentives" to executives, the ICGN believes.
>
>The proposals come as a survey by the Co-operative Insurance Society,
>which has 24bn of assets under management, found more than half FTSE-100
>companies do not have a fully independent committee to set executive pay.
BBC:
>The ICGN proposes a code of conduct for executive remuneration Claims by
>top corporate executives that huge salary increases are justified by the
>scarcity of their talent have been dismissed by a powerful lobby of
>international fund managers.
>
>A report by the International Corporate Governance Network (ICGN) suggests
>there is no real international market for these executives and so boosting
>pay packets for this reason may not be justified.
>
>The ICGN is proposing a code of conduct for future executive remuneration,
>but baulks at any sort of statutory control.
>
>The ICGN has significant clout, as its institutional investor members
>control $10 trillion of assets worldwide.
>
>Formed in 1995 its backers include fund giants such as Calpers, Hermes
>Pensions Management and Barclays Global Investors.
>
>Rewarding success
>
>Ross Goobey, head of the ICGN committee looking at executive pay, said
>that a statutory body was not the answer, rather that shareholders should
>determine appropriate levels of remuneration.
>
>The key to this, he said, was the availability of information to
>shareholders and their willingness to act. They were traditionally
>reluctant to do so, he said, but believed this was now beginning to change.
>
>Mr Goobey said international comparisons of pay packets, particularly with
>the United States, had caused salaries and benefits to rise with the
>exception of Japan, where executives were underpaid.
>
>A lack of checks and balances on these pay increases beyond the boardroom
>in the United States had been a problem until now, but post-Enron a new
>consensus that this issue must be tackled had emerged, he said.
>
>However Mr Goobey emphasised that success had to be properly rewarded.
>
>"We must get away from the idea that all these very high payments are
>completely unjustifiable," he said.
>
>But at the moment we were in a situation where everyone was rewarded
>regardless of their level of success, he added.
>
>The report is expected to be approved at the ICGN's annual summit in
>Madrid next month.