Workforce.com

Directors Vary on Appropriate CEO Pay

February 7, 2008
More than half of corporate directors surveyed said CEO compensation at publicly traded U.S.-based companies is “just about right except for a few high-profile cases,” but one-third of directors said most are paid too much.

According to a joint survey of directors by Heidrick & Struggles International and the Center for Effective Organizations at the University of Southern California’s Marshall School of Business, 51.8 percent think CEO pay is generally appropriate, but 32.2 percent believe CEO compensation is “too high in most cases.”

Ninety percent said CEO pay should be no more than two to three times higher than the next highest-paid executive, though 85 percent think that pay spread is about right in their own company.

Only 11.2 percent said the SEC-mandated executive compensation disclosure in proxy statements served investors well; 11.6 percent agreed to a “great” or “very great extent” that the information was easily understood; 10 percent said the disclosure does a good job of explaining how compensation decisions are made; and 27.8 percent agreed that the proxy statements provide valuable information about the amount of executive compensation.

“While more disclosure is generally viewed as a good thing, most board members find that what is made available today is difficult to understand, lacking in context and generally not effective for informing investors and other company stakeholders,” Ed Lawler, director of the center and professor of business at Marshall School, said in a statement about the survey.

In all, 227 directors responded to the survey.

This story was originally filed by Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.