This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Will 'Say on Pay' Become the New Normal for CEOs?

But then, CEO compensation has ballooned to the point where the average American worker might find it difficult even to imagine. For example, ConocoPhillips (COP) CEO Jim Mulva reportedly received about $17.9 million in 2010, a 25% increase over the prior year, according to a securities filing cited in the Journal. To put that number in context, the median annual income of American households reportedly continues to hover below $50,000, even when adjusted for inflation. Mr. Mulva is undoubtedly good at his job, but is anyone really 358 times better than everyone else?

CEO pay can become even more troubling when buyouts and mergers come into play. For example, Motorola Mobility's (MMI - Get Report) CEO, Sanjay Jha, made a sweet deal when Google Inc. agreed in August to buy the company for $12.5 billion. According to calculations by the Journal and the Hay Group, a management consulting firm, Jha reportedly could earn over $62 million in severance and accelerated vesting of stock options and restricted stock if he leaves Google (GOOG) in the next two years. Jha may be delighted with the deal, but his employees may not share his enthusiasm if Google lets them go. Looking at Jha's personal benefit from the deal, one could easily conclude that CEOs are being incentivized to wind up and sell their companies, not to shape them into vigorous, sustainable businesses that can offer jobs to millions of unemployed American workers.

Critics of hefty CEO compensation might argue that the Dodd-Frank Act's "say-on-pay" provisions, which allow shareholders to reject inflated executive pay packages, are long overdue. But it appears that CEOs needn't worry too much just yet. Shareholders generally seem supportive of high CEO salaries even when companies are in trouble. The Journal reports that in 2010, before the Dodd-Frank Act became law, shareholders objected to executive compensation at only three of 300 companies that had to offer "say on pay" votes to receive bailout funds or chose to do so voluntarily. Of 2,532 companies reporting on "say on pay" shareholder votes so far this year, including Hewlett-Packard (HPT) and Stanley Black & Decker (SWK), only 1.5% of executive compensation packages received a thumbs-down. And, since shareholder votes are non-binding under Dodd-Frank, even corporations whose investors reject executive pay can choose to ignore them.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AIG $58.73 -2.67%
MMI $40.99 -3.46%
AAPL $109.90 -2.50%
FB $88.94 -0.55%
GOOG $604.00 -2.30%

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs