Executive pay is becoming a public matter
By Kevin Smith© Pasadena Star-News, December 17, 2009
If an employee brings value to a business and helps a company boost its earnings, that employee should be compensated accordingly.
But executive salaries shouldn't be shrouded in secrecy, said Naree W.S. Viner, co-leader of the education and nonprofit practice for Gary Kaplan & Associates, a Pasadena-based executive search firm.
"In the old days, people didn't talk about how much their house was worth," Viner said. "But when the real estate boom came along people were over-sharing that kind of information. The taboo about discussing that has gone away. But I think more people should know what salary ranges are across the board."
Federal regulators would seem to agree.
On Wednesday, they voted to require companies to reveal more information about how they pay their top executives amid a public outcry over compensation.
The Securities and Exchange Commission voted 4 to 1 to expand the disclosure requirements for public companies.
Company policies that encouraged excessive risk-taking and rewarded executives for delivering short-term profits have been blamed for fueling the financial crisis.
And businesses have been accused of understating how much their top executives are paid. At issue is how public companies report stock options and stock awards in regulatory filings. Such awards often make up most of top executives' pay.
"I think more transparency can only be beneficial," Viner said. "It won't make employers happy, but in a competitive market where you want to keep people happy and retain good employees, it would be good."
Viner said salaries should also be made known much earlier when someone is applying for a job.
Job applicants frequently come in for multiple interviews. But sometimes they don't find out what a position actually pays until they have already invested a lot of time and expense, she said.
And some executive salaries have hit stratospheric levels.
In 2008, Bank of America CEO Kenneth D. Lewis pulled in more than $9.9 million in total compensation. But that was nothing compared to the $23.6 million the company's CEO earned in total compensation the year before.
Are some executives simply making too much?
"Oh yes, the vast majority of them are," said Kerry Fields, a professor of business law and ethics at the USC Marshall School of Business. "At some point in time, their self interests and greed will overtake their duties to the shareholders."
Fields said it is "reprehensible" that companies can deduct that kind of compensation as an ordinary business expense without having to pay some kind of state or federal surcharge.
"There should be complete disclosure of all compensation packages that are not known to shareholders," he said.
The Associated Press contributed to this report.
kevin.smith@sgvn.com, (626) 962-8811, Ext. 2701
