Would You Like to Know How Much Your CEO is Making?

Posted on 18. Jan, 2006 by in News

SEC SealWell, so would a lot of people – including the SEC.

The Securities and Exchange Commission voted unanimously today to float changes aimed at giving investors more information on executive pay and perks. Under the new proposal, companies would be required to begin providing details on pay – including a single dollar figure. So instead of trying to carefully try and find out how much a CEO is making after considering retirement pay, golden parachutes, or stock options the proposal would consolidate that mess into one beautifully inflated number. There are a number of reasons why the SEC has finally decided to do this:

  • “One-stop shopping” for investors who want to quickly discern what CEOs really earn
  • Shareholders will have no one to blame but themselves if executive pay continues to rocket upward
  • Quoting the SEC chairman, Cox, “Simply put, our rules are out of date.”
  • Companies would have to provide itemized disclosure of all perks if the total value exceeds $10,000 a year
  • Companies also would have to explain their policies and procedures for approving transactions with related parties and provide more disclosure about meetings of nominating, audit and compensation committees

What’s my initial reaction? Hallelujah! One of my biggest complaint about “Corporate America” has been the over-compensation of CEOs – especially ones that never do anything constructive to help the company. Most of the time, members of the Board for these companies do not even understand the complicated compensation plans which include retirement benefits, stock options, perks, and other forms of compensation. I believe that the largest benefit that will emerge from this proposal will be the responsibility it will

place in the hands of the shareholders. Shareholders will now be responsible for CEO and executive compensation and I can guarantee that they will not be happy when the CEO is not told of post-retirement benefits such as a bodyguard and New York apartment or a $20 finders fee. Shareholders will begin to be able to see how the out-of-control CEO compensation is affecting the company’s bottom line and hurting the morale of other employees.

I understand that the job of CEO is one that requires intense concentration and in most cases, some degree of advanced intelligence. However, only in very unique cases to I believe that CEOs should be making tens of millions of dollars. If a normal employee is making, say, $50,000 and the CEO is making $25 Million that tells me that the CEO is working 500 times more – or providing 500x more value than an average employee. I find that simply hard to believe in most cases…

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