Pitt: Safeguard Exec Comp in Escrow

July 7, 2004 (PLANSPONSOR.com) - Former Securities and Exchange Commission Chairman Harvey Pitt has weighed into the fray over excessive executive compensation packages with a suggestion that a portion of that compensation be put into escrow.

In a column written for Compliance Week, Pitt recommended that a large part of an executive’s total compensation be placed in an interest-bearing escrow account to be paid upon the “successful completion of the CEO’s tour of duty.”

According to Pitt, now chief executive officer of governance consultancy Kalorama Partners in Washington, D.C., companies “may increasingly be under pressure to recoup severance payments, salary, bonuses, option profits and other payments to executives who bear responsibility for a company’s sub par performance or malfeasance.”

Pitt concluded: “The use of an escrow account can facilitate this process.”

Among Pitt’s other recommendations: Compensating senior executives with restricted stock instead of stock options and linking compensation to performance metrics that are “legitimate corporate goals…not for achieving some measure of earnings per share.”