Of Concern? CEO Pay and the Economy

crossposted from unbossed

You bet! And here are some links to information on this important issue.

First up, the House Committee Committee on Oversight and Government Reform has been releasing documents related to CEO pay and the mortgage crisis. Each of these links will lead you to a, well, wealth of documents and written testimony.

Committee Committee on Oversight and Government Reform Memorandum on CEO Pay and the Mortgage Crisis  March 6, 2008

Committee on Oversight and Government Reform hearing, "Executive Compensation II: CEO Pay and the Mortgage Crisis" on Friday, March 7

I was particularly touched by testimony justifying a life that has contributed to our country's crisis and the immiseration of so many people by a grossly overpaid CEO who claims to be one of the little people because he came from humble beginnings.

Second, Open CRS has now provides access to an important research document. Executive Compensation: SEC Regulations and Congressional Proposals

The dispute concerns the gross inflation of executive pay compared to their performance and how best to ensure that the two are connected. There is also some concern over just the enormous pay these executives are receiving.

One theory is that if information is provided to shareholders, then the market will ensure that the pay situation will correct itself. That might work but for the fact that the executives have every incentive to hide what the true level of their compensation is. The problem is that, while mortals get paid a salary or wage and that is basically it, executive compensation includes salaries but their true wealth comes from a variety of sources. As we know, companies may be paying for executive houses, vacations, and more - things we mortals must pay for out of our own pockets - but not attributing these to the executive's pay.

Here is the summary of the report.

Concern about shareholder value, corporate governance, and the economic and social impact of escalating pay for corporate executives has led to a controversy regarding the practices of paying these executives. On July 26, 2006, the Securities and Exchange Commission voted to adopt revisions to its rules on disclosure of executive compensation. On December 22, 2006, the SEC announced that it had adopted changes in the July 26 rules. These December 22 changes have become somewhat controversial, with opponents saying that they obfuscate executive compensation and with proponents saying that the changes are necessary to give a truly accurate picture of executive compensation. Congressional proposals concerning executive pay have thus far not focused on the SEC rules. Instead, proposals have been made concerning additional disclosure of executive compensation and limiting the amount of deferred compensation for tax purposes. This report will be updated as warranted.

This level of pay is certainly important as a symptom of a system of corporate governance that is broken.

It is also a symptom of a larger problem - the sense of entitlement and disregard of the communal welfare that so many in power now have. In some cases it is virtually a kleptocracy.

We as a country are in big trouble when those in power lose all sense of the role they play in the fate of this country. They apparently have never heard: To those to whom much is given, much is expected.

No one is self made. None of us can exist but in community. These self-aggrandizers are poisoning the well from which they drink.