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October 12, 2006
Looking At Executive Pay
The WSJ has a fascinating story today (sorry, but it's a paid link) on the history of soaring executive pay:
Amid the economic downturn and corporate restructurings of the early 1990s, complaints about such awards found receptive audiences. In 1992, Democratic presidential candidate Bill Clinton made executive pay a campaign issue. Washington responded.
The SEC said it would require more disclosure about compensation, particularly stock options and executive perks. The following year, after Mr. Clinton was elected, Congress decided companies could no longer take tax deductions on executive compensation of more than $1 million, unless it was related to performance.
Neither approach slowed the upward march of executive compensation. In fact, the disclosure rules allowed CEOs to see what others were getting, encouraging a competitive spiral. The tax law, meanwhile, drove up the compensation of CEOs who were making less than $1 million. Executives considered the cap a "minimum wage for CEOs," says Mr. Koppes, the former Calpers official.
SEC Chairman Christopher Cox recently said the 1993 law belongs in "the Museum of Unintended Consequences," because it encouraged the growth of "less transparent forms" of pay, such as pensions and deferred compensation.
Posted by edelfenbein at October 12, 2006 12:26 PM
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