Are CEOs Paid Too Much ? CEO Salary Year Compared to Blue-Collar Worker Avg. 1980 42 times - PowerPoint PPT Presentation

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Are CEOs Paid Too Much ? CEO Salary Year Compared to Blue-Collar Worker Avg. 1980 42 times PowerPoint Presentation
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Are CEOs Paid Too Much ? CEO Salary Year Compared to Blue-Collar Worker Avg. 1980 42 times

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Are CEOs Paid Too Much ? CEO Salary Year Compared to Blue-Collar Worker Avg. 1980 42 times

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  1. Are CEOs Paid Too Much? CEO Salary YearCompared to Blue-Collar Worker Avg. • 1980 42 times • 1990 85 times • 2000 531 times Source: Business Week

  2. Comparative Total Compensation Cost -Top Management Positions In USD ‘000 1000 900 800 Stock Plan 700 Other Perks 600 Cy Car 500 Cy Ben. Plan Soc. Sec. Contr. 400 Bonus 300 Base Salary 200 100 0 Belg. Fr. Ger. It. Sp. Swe. Swi. UK USA NL

  3. Proportion of Base Pay in Annual Total Cash Source of Data: "Watson Wyatt Data Services” The proportion of variable pay of US executives is noticeably greater than for Europe. United Kingdom* USA* Switzerland* Germany* France* *Number of participating companies: Switzerland: 102 Germany: 202 United Kingdom: 169 France: 155 USA: 1741

  4. The Conference Board Recommendations on executive compensation • Compensation Committee Responsibilities • Compensation committee members should be independent • Chair of compensation committee should be accountable • Meetings (called by Chair) should be held independent of board meetings • All forms of compensation should be reported to SEC • Performance-based Compensation • Link to long-term strategic goals • Recapture provisions in cases of malfeasance • Equity-based Incentives • Expense stock options (report all costs prominently) • Require execs to accumulate stock • Minimum holding periods

  5. US Stock Incentives: Overhang and Shares Granted to Top Executives

  6. Checks on CEO Power & Independence • Boards of Directors • Shareholders • “Wall Street Walk” • Elections & resolutions • Lawsuits • Hostile Takeovers

  7. Board Independence. A majority of directors must be independent. Independent directors must meet periodically in executive session. Audit Committees. Audit committee - three or more independent directors. Executive Compensation. Compensation committee - independent directors. Director Nominations. Nominating committee - independent directors.Related Party Transactions. All related party transactions must be reviewed for potential conflicts of interest and approved by a company's audit committee. NASDAQ Corporate Governance Rules (2004)

  8. The Rise of the Institutional Investor

  9. The Rise of the Institutional Investor

  10. Conduct internal consultations among management  • Determine the value of the company by use of industry norms (i.e., book value, market value, etc.)  • Develop a negotiation strategy  • Conduct careful board deliberations  • Minimize unnecessary time pressures  • Review all data and information thoroughly  • Make use of outside experts to validate your decision (i.e., lawyers, investment bankers, and accountants) Duty of Care - when evaluating a sale or merger: 

  11. Self-dealing • Competing with the corporation • Entrenchment • Officers and directors rubber-stamp a decision in order to continue in the interested party's good favor • Trading on inside information, or not disclosing the trading of others. Duty of Loyalty - Common violations: