Ultimately, it probably amounts to little more than pandering to the populace, but many politicians (Republicans and Democrats alike) are making noise about the need to rein in or at least increase the transparency of executive compensation packages.
The perceived need for some institutional control when it comes to compensation has become high profile news in the wake of cases where boards and CEOs "mutually agreed" the executives should exit quickly, being careful not to let the door hit them on the way out. Unfortunately, many shareholders in these companies soon found the separation was not so sweet as dismissed execs (Robert Nardelli comes quickly to mind) went out the door with a number of extravagant parting gifts.
In his reply to the State of the Union address given by President Bush, Sen. Jim Webb (D - VA) said, "When I graduated from college, the average corporate CEO made 20 times what the average worker did; today, it's nearly 400 times. In other words, it takes the average worker more than a year to make the money that his or her boss makes in one day."
Rep. Barney Frank (D - MA), who serves as the chair for the House Financial Services Committee, has made it known that he intends to introduce legislation that would require public companies to put executive pay up for a shareholder vote on an annual basis.
On Wednesday, President Bush delivered his State of the Economy speech at Federal Hall in New York. In his remarks, Mr. Bush, listed positive developments in the areas of economic growth, stock market gains, low inflation, jobs and wages.
The President said it was clear that business worked best when free market conditions prevailed. He also acknowledged that the rights of a free (market) society bring along corresponding responsibilities.
"A free and vibrant economy depends on public trust. Shareholders should know what executive compensation packages look like. I appreciate the fact that the SEC has issued new rules to ensure that there is transparency when it comes to executive pay packages," he said. "The print ought to be big and understandable. When people analyze their investment, they ought to see loud and clear -- they ought to be able to see with certainty the nature of the compensation packages for the people entrusted to run the companies in which they've got an investment."
The President then added, "Government should not decide the compensation for America's corporate executives, but the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders. America's corporate boardrooms must step up to their responsibilities."
Discussion Question: Where do you stand on the need for transparency and/or limits on the compensation paid to executives in retailing and other industries?
- Transcript: Sen. Webb's Democratic Response to Bush's State of the Union Address - Fox News
- Remarks by President Bush on the State of the Economy - PRNewswire-USNewswire