Executive compensation

From MarketsWiki
Jump to navigation Jump to search

Executive compensation is the payment given to top executives of business corporations. It includes basic salary, bonuses, shares, options and other company benefits. The board of directors of the company is ultimately responsible for determining executives' pay levels. However, most corporate boards use consultants to advise them on how much to pay top executives. In fiscal 2007, 819 companies in the Fortune 1,000 index used compensation consultants, up from 677 in fiscal 2006. [1]

The issue of CEO compensation has come to the forefront in the post-Enron era. Since 1980, executive pay at big corporations has increased more than sixfold. The average CEO of an S&P 500 company made $15.06 million in 2006, according to the Corporate Library, an independent research firm.

The House Committee on Oversight and Government Reform held hearings on the issue. “Reports of astronomical payouts to corporate CEOs have led many to question the fairness and effectiveness of the system for setting executive pay,” said Chairman Henry Waxman (D-CA).[2]

On April 17, 2012, executive compensation and say-on-pay rules came into the spotlight when Citigroup shareholders voted to reject the bank’s executive compensation package at the annual meeting, leaving Citigroup with the option to either acknowledge the shareholder recommendation through future decision making, or to ignore the advisory vote entirely.[3]