Dan Walter's Latest Comp Cafe article; "Executive Compensation Contradiction: Differentiate…But Don’t Innovate?"

Executive Compensation Contradiction: Differentiate…But Don’t Innovate?

Executive Compensation Contradiction: Differentiate…But Don’t Innovate?

A recent article in London’s, The Telegraph “Overhaul the role of pay advisers, urges Lord Myners”, pushes for more accountability on the part of the advice provided by executive compensation
and remuneration consultations. At issue are recent pay packages that
met with shareholder ire, including those at Barclays and Cookson Group.

At both companies, CEOs
had large compensation packages approved by their boards. In both
cases, the companies used external consultants. At both companies, the
packages for the CEOs were outside the norm. And, at both companies, the
boards made it clear that they utilized the expertise and experience of
their outside consultants to guide them through the process of creating
better compensation programs.

The CEOs made more money than some thought was warranted. It seems
obvious to them that the pay packages were incorrectly or intentionally
structured to pay out higher than might otherwise be warranted. In both
cases, the programmes (hey, it is the UK…) were not typical of the
peers’ remuneration programs. There is an outcry for better link between
pay and performance and these different plans did not make that link as
expected.

Here’s the rub…