Word: ceo
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...Goldman Sachs is doing pretty well for a financial services firm these days: its stock is down only 14% over the past year, compared to 29% for the currently embattled industry overall, and it earned $11.6 billion in profits in its most recent fiscal year. So does that mean CEO Lloyd Blankfein deserves the $70 million pay package he received for 2007? Maybe. Or maybe not. But at the very least shouldn't public shareholders - the people who actually own the company...
...founders of the "say on pay" movement probably wouldn't put it so diplomatically. In the fall of 2005, the American Federation of State, County and Municipal Employees (AFSCME), a union that runs a $850 million pension fund, was trying to figure out what to do about CEO pay - especially at Home Depot, one of its holdings, where then CEO Bob Nardelli was collecting a nearly $32-million pay package for the year, while the company's stock languished. "We had reached a level of frustration because it seemed CEO pay, no matter what we did as activist investors, kept...
...savviest argument companies make is that there are mixed results about what, exactly, say-on-pay votes accomplish. In the U.K. there have been some resounding successes - most notably GlaxoSmithKline, which revamped its pay practices, aligning compensation with performance, after a "no" vote of 50.7% in 2003. (Its CEO at the time was on track to earn about $18 million.) Yet various studies have shown that in the years since say-on-pay went into effect, CEO compensation has continued to rise, anywhere between 5% and 11% annually...
...couple of important ways, the system seems to be working. In a recent paper, Fabrizio Ferri and David Maber of Harvard Business School document how, since say-on-pay went into effect in the U.K., CEO compensation has become more likely to fall when operating performance does. "'Say on pay' in the U.K. was effective in achieving one of its major goals," the authors write, "to reduce the 'rewards for failure' through a stronger link between pay and realizations of poor performance." That effect has been most pronounced at the firms handing out the biggest pay packages...
...Amos knows something about talking to investors. The Aflac CEO was stunned a year and a half ago when he found out that a shareholder had submitted a proposal for a say-on-pay vote at his company. "My first inclination was, What have we done wrong?" he says. As it turns out, nothing. When he talked to the people at Boston Common Asset Management they said a vote was simply in the general interest of shareholders. Amos then went to the insurance company's largest shareholders and asked what they thought. He wasn't expecting large, fairly conservative mutual...