The subpoena came after the consulting firm failed to comply with a request for information about potential conflicts in its compensation consulting business. According to the New York Times, Congressman Henry A. Waxman (D-California), Chairman of the Committee on Oversight and Government Reform, is examining the potential for conflicts of interest among pay advisers who provide other services to their corporate clients.
According to the report, the firms that received the requests included Hewitt Associates, Watson Wyatt Worldwide, Mercer Consulting, and Towers Perrin. In May, Waxman asked the firms to identify the largest 250 companies measured by revenue for which the firm provided both executive compensation consulting services from January 1,2002, through December 31,2006, and for each company identified:
- the nature of the executive compensation consulting services provided
- the total revenues received annually for providing executive compensation consulting services
- the nature of all other services (other than executive compensation consulting services) provided, and
- the total revenues received annually for providing these other services.
In a letter sent to Mark V. Mactas, chief executive of Towers, Waxman wrote , “Although other firms have made significant efforts to provide complete responses to the committee’s inquiry, Towers Perrin has provided virtually none of the responsive information”.
"I regret that we reached this impasse," Waxman continued, "and that the committee had to resort to compulsory process to obtain information on whether Towers Perrin's advice to corporate boards on executive compensation is tainted by conflicts of interest."
A spokesman for Towers acknowledged receipt of the subpoena, and said it was "reviewing the subpoena and is in the process of alerting its clients." The report said the spokesman said that the firm had policies and safeguards in place to ensure the objectivity of its professional advice.
When he requested information last month (copies of the letters are online here ), Waxman said that "Recent press reports and company disclosures have raised questions about the independence of the advice companies receive from executive compensation consultants." He went on to note that "Shareholders and investors have expressed concerns that a compensation consultant's ongoing business relationships with a company could compromise the independence of the advice the consultants provide to the company's board about executive compensation."