Board Compensation Committee And CEOs Disagree Over Executive Pay

Although only 3.4% of CEOs say excessive pay occurs frequently, 14% of Compensation Committee members say executives are overpaid too often. While 85% of Compensation Committee members believe there is evidence of excessive CEO pay, 41% of CEOs say that excessive CEO pay is rare.

“These conflicting views suggest that Compensation Committee members are awake to the pay vs. performance issue and their responsibility to exercise independent oversight,” said Steven Hall, Managing Director of Steven Hall & Partners in a statement. “While it is human nature for CEOs to consider themselves fairly paid, the fact that committee members have a different perspective is a positive sign in the rebalancing of power within the corporation.”

When asked if they feel there should be a cap on CEO pay, 25% of committee members agreed, while only 18% of CEOs agreed. But with both groups that favor limits, 32% indicate that the Board should set any limits imposed, and 2% or less of either group favor handing over executive pay to Congress, the SEC or shareholders.

Both groups in the survey were staunchly against executive pay being subject to shareholder approval, with 92% of CEOs and 78% of committee members marking against the measure.

The survey also looked at compensation packages for chief executives, with one-third of Compensation Committee members, nearly double the percentage of CEOs, favoring a legislative provision limiting the funding of nonqualified pension benefits for senior executives in certain circumstances.

A similar pattern emerged in responses to questions about CEO severance packages, with 24% committee members believing CEO severance packages should be subject to shareholder approval during the regular course of business, compared to 14% of CEOs. Nearly 40% of committee members say that shareholders should approve CEO severance packages in change of control situations, versus 21% of CEOs.

Other recent reports have shown that while CEO pay is still high, it grew at a slower pace in 2005 than the year before (see CEO Pay Climbing At A Slower Pace ) and another that found that US executives are the highest paid in the world, with an average of $324,000 each year (see Mercer: US Exec Salaries Lead the Globe ).