Executive Compensation

RECENT NEWS
Motley Fool  Dec 19  Comment 
Incentives matter, and they can affect the companies you’re investing in in all kinds of weird ways.
SeekingAlpha  Jul 29  Comment 
By Crunching Numbers: All too often shareholders blindly follow the recommendations of the Boards with respect to the annual proxy statements. That's why it was surprising last year when the executive compensation for Capstone Turbine...
Forbes  Jun 17  Comment 
Once again the results are in and once again they show that executive compensation in the U.S. has escalated dramatically. It has gone up more than corporate earnings, inflation, the stock market, and the pay of almost everyone in the country, not...
Reuters  May 22  Comment 
McDonald's Corp shareholders on Thursday overwhelmingly approved an advisory measure on executive pay at the fast-food chain, where Chief Executive Officer Don Thompson took home total compensation of $9.5 million in 2013.
DailyFinance  Apr 21  Comment 
PHILADELPHIA, PA--(Marketwired - April 21, 2014) - American Law Institute Continuing Legal Education (ALI CLE) is pleased to announce its upcoming program, Executive Compensation: Strategy, Design, and Implementation, will take place on June...
Wall Street Journal  Feb 28  Comment 
McKesson's chief executive cut his pension benefit by $45 million as the company revamped its incentive-compensation program for top executives, in the wake of complaints from activist investors.
Market Intelligence Center  Feb 19  Comment 
Stocks fell Wednesday after some weak economic data this morning was followed up by minutes from the most-recent Federal Reserve meeting that show that in addition tapering asset purchases, some members of the Open Market committee believe...
New York Times  Jan 13  Comment 
Fifth & Pacific, which is adopting the name Kate Spade, disclosed compensation for its incoming executives.
Bloomberg  Jan 8  Comment 
Matthew C. Klein COMMENTS




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Executive Compensation (Pay), is financial compensation received by an officer of a firm. It is typically a mixture of salary, bonuses, shares of and/or call options on the company stock, benefits, and perquisites, ideally configured to take into account government regulations, tax law, the desires of the organization and the executive, and rewards for performance.Over the past three decades, executive pay has risen dramatically relative to that of an average worker's wage in the United States, and to a lesser extent in some other countries. Observers differ as to whether this rise is a natural and beneficial result of competition for scarce business talent that can add greatly to stockholder value in large companies, or a socially harmful phenomenon brought about by social and political changes that have given executives greater control over their own pay.Executive pay is an important part of corporate governance, and is often determined by a company's board of directors.

Levels of compensation

The levels of compensation in all countries has been rising dramatically over the past decades. Not only is it rising in absolute terms, but also in relative terms. In 2007, the world's highest paid chief executive officers and chief financial officers were American. They made 400 times more than average workers -- a gap 20 times bigger than it was in 1965.The U.S. has the world's highest CEO's compensation relative to manufacturing production workers. According to one 2005 estimate the U.S. ratio of CEO's to production worker pay is 39:1 compared to 31.8:1 in UK; 25.9:1 in Italy; 24.9:1 in New Zealand.

Controversy

The explosion in executive pay has become controversial, criticized by not only leftists but conservative establishmentarians such as Ben Bernanke and George W. Bush

The idea that stock options and other alleged pay-for-performance are driven by economics has also been questioned.

Defenders of high executive pay say that the global war for talent and the rise of private equity firms can explain much of the increase in executive pay. For example, while in conservative Japan a senior executive has few alternatives to his current employer, in the United States it is acceptable and even admirable for a senior executive to jump to a competitor, to a private equity firm, or to a private equity portfolio company. Portfolio company executives take a pay cut but are routinely granted stock options for ownership of ten percent of the portfolio company, contingent on a successful tenure. Rather than signaling a conspiracy, defenders argue, the increase in executive pay is a mere byproduct of supply and demand for executive talent. However, U.S. executives make substantially more than their European and Asian counterparts.

The U.S. Securities and Exchange Commission (SEC) has asked publicly traded companies to disclose more information explaining how their executives' compensation amounts are determined. The SEC has also posted compensation amounts on its website to make it easier for investors to compare compensation amounts paid by different companies. It is interesting to juxtapose SEC regulations related to executive compensation with Congressional efforts to address such compensation.

A company is required to file its annual proxy statement with the SEC no later than the date proxy materials are first sent or given to shareholders. You can see this filing by using the SEC's database, known as EDGAR. To access the EDGAR database, go to the SEC's web site - www.sec.gov - and find the section entitled "Filings and Forms (EDGAR)." Click on "Search for Company Filings." When you get to the screen entitled "Search EDGAR Database," click on "Companies and Other Filers." Then enter the name of the company and then click "Find Companies." Select the appropriate company to view its SEC filings.

Click Here: SEC Website [1]

To view the annual proxy statement, select the most recent filing that has the title "DEF 14A." It's called a "DEF 14A" because it's the "definitive," or final, proxy statement. "14A" refers to the fact that proxy statements are filed pursuant to Section 14(a) of the Securities Exchange Act of 1934.

See also Wall Street Bonuses.

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