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Thursday, March 28, 2024

Executive Pay Gluttony

Executive Pay Gluttony

Excerpt:

Executive compensation is in the news again as the Securities and Exchange Commission gets ready to issue new guidelines on pay disclosures. As mandated by the Dodd-Frank Act, the new rules are supposed to provide “greater transparency and allow shareholders to be better informed” about executive and director compensation.

Transparency is certainly a good first step. But it does nothing to address the underlying and deeply entrenched issue of executive compensation as a wealth-transfer mechanism. Assets get moved from shareholders to the C-suite.

A closer look at the underlying factors that led to these excesses reveals a complex situation, driven by numerous actors. Before we look at some of them, a quick reminder as to how we got here:

Roger Lowenstein’s book "Origins of the Crash: The Great Bubble and Its Undoing" describes the moment when executive pay went off the rails. In 1991, Heinz Chief Executive Officer Anthony J.F. O'Reilly received a then-eye-popping pay package of $75 million, almost all of which was due to stock awards. O’Reilly was the highest paid CEO that year, receiving the equivalent of about $130 million in today's dollars. 

Keep reading: Executive Pay Gluttony – Bloomberg View.

Picture via Pixabay. 

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