Daily Revolt

October 15, 2007

CEOs Think they are Overpaid

This is quite of a revelation. Many of us have thought for a long time that CEOs were overpaid, but for them to admit it is a vindication. It also undermines the argument made by the apologists for the inequitable growth of the economy over the last decade:
Most US corporate leaders believe chief executives are overpaid and do not provide value for money for their com­panies, according to a study that will embolden critics of excessive compensation.

The findings – to be published today by the National Association of Corporate Directors – are likely to strengthen calls by investors and politicians, including George W. Bush, US president, for restraint on executive pay at a time of growing income inequality in the US.

[...]Their views were backed up by outside directors, with more than 80 per cent of them saying chief executives were overpaid.

[...]The issue is particularly sensitive because the gap between rich and poor in America has reached its widest point in more than 60 years.

Figures released last week showed the share of national income claimed by the wealthiest 1 per cent of Americans had reached 21.2 per cent – a postwar record – partly because of booming company profits.

Mr Bush last week told The Wall Street Journal that he thought some executive compensation was excessive and that some boards needed to improve their oversight of this.

Nearly 60 per cent of the directors polled by the NACD said the reason for excessive pay packages was the absence of objective ways to measure an executive’s performance. Nearly half criticised the use of options and equity awards that reward executives when the company’s share price goes up, rather than when its operations improve.

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