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Company profits may be average but CEO pay packages are still big

Company profits may be average but CEO pay packages are still big

by Rick Turoczy on April 3, 2005

Institutional shareholders, the corporate governance movement and tighter regulatory scrutiny mandated by 2002′s Sarbanes-Oxley Act have prompted greater corporate oversight by directors and have emboldened more boards to oust CEOs over non-performance, malfeasance, even moral lapses. Despite new Nasdaq and New York Stock Exchange rules mandating board autonomy, directors remain largely beholden to management when it comes to compensation.

Compensation consultants say many boards are more diligent in linking pay for performance and sensitive to shareholder criticism, especially after several slow years on Wall Street. But ”there’s still a culture that says any sort of positive performance has to be met with a significant increase in pay,” says Pat McGurn of proxy adviser Institutional Shareholder Services. ”It’s become an executive entitlement system.”

Since scandals at Enron, WorldCom and other companies, directors share the same liability for corporate collapses as the CEOs they oversee. So it’s understandable that most spend more time scrutinizing management over finances than over executive compensation. Based on current proxy data, there’s little apparent change.

Company profits may be average but CEO pay packages are still big

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