Pensions at the Top
April 10 closes the comment period for the SEC's proposed rule about executive compensation reporting. As we await the final version, we have some indication about what lies ahead. According to the Wall Street Journal ("Adding It All Up" by Joann S. Lublin, April 10, 2006), directors are shocked to learn how much C-level executives are really making. The New York Times reports a widening gap between those at the top and everyone else ("Off to the Races Again, Leaving Many Behind" by Eric Dash, April 9, 2006).
We could have a vigorous and long debate about the merits of executive pay. Should executives be paid commensurate with performance? What amount is sufficient to assume the responsibilities that others shun? In a free market environment, what is the proper differential reward for advanced skills, including the ability to lead?
While efforts to reform the way executives are paid are laudable, the numbers themselves are of limited interest. Once we know that Mr. or Ms. Big makes a lot, what then? Isn't it just as important to understand how compensation committee members decide on a final recommendation? Equally helpful, how does a company choose how much to compensate its employees, especially with respect to post-retirement benefits? Should a one size fits all approach be used or should employees below executive rank be given a bevy of choices?
Shedding light on the process itself offers invaluable lessons. Otherwise, we are left in the dark about a topic that has import for employees and shareholders alike.
If a retirement crisis is truly upon us (and not all agree that this is so), what is a company's risk of being branded "bad" if pensions for line workers take a hit at the same that its executives walk off into the sunset? What is the cost associated with a damaged reputation, possible litigation and financially ruined lives?
We could have a vigorous and long debate about the merits of executive pay. Should executives be paid commensurate with performance? What amount is sufficient to assume the responsibilities that others shun? In a free market environment, what is the proper differential reward for advanced skills, including the ability to lead?
While efforts to reform the way executives are paid are laudable, the numbers themselves are of limited interest. Once we know that Mr. or Ms. Big makes a lot, what then? Isn't it just as important to understand how compensation committee members decide on a final recommendation? Equally helpful, how does a company choose how much to compensate its employees, especially with respect to post-retirement benefits? Should a one size fits all approach be used or should employees below executive rank be given a bevy of choices?
Shedding light on the process itself offers invaluable lessons. Otherwise, we are left in the dark about a topic that has import for employees and shareholders alike.
If a retirement crisis is truly upon us (and not all agree that this is so), what is a company's risk of being branded "bad" if pensions for line workers take a hit at the same that its executives walk off into the sunset? What is the cost associated with a damaged reputation, possible litigation and financially ruined lives?
