Top American executives' pay checks depend on 'say-on-pay' votes
By siliconindia   |   Wednesday, 13 April 2011, 18:57 IST
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Top American executives' pay checks depend on 'say-on-pay' votes
Bangalore: The U.S. economy which is reeling under unemployment and economy dip still has some space left for pay hikes for the top management people of companies. In a time when millions of Americans are having nightmares of losing their jobs and employees are "ok" with the kind of salary they have been given, companies like 3M, General Electric and Cisco Systems are busy giving away happy pay packages to their Chief Officers. But why blame the companies when the American businesses itself is seeing a boost? American businesses shot up to an astounding 29.2 percent, the fastest growth in more than 60 years. American corporation profits annual rate reached $1.678 trillion. On this year's list, the highest-paid CEO was Philippe P. Dauman of Viacom, who made $84.5 million in just nine months. Viacom has said the compensation was inflated by one-time stock awards linked to a long-term contract signed last year. Ray R. Irani, the CEO of Occidental Petroleum took home $76.1 million, up 142 percent from the previous one. The board awarded Irani a $33 million cash bonus plus $40.3 million in stock awards. Lawrence J. Ellison of Oracle, the software giant, followed close behind, with a $70.1 million payout, $26.3 billion in stock and other holdings in Oracle. According to Business Week, the average CEO of a major corporation made 42 times the average hourly worker's pay in 1980. By 1990 that had almost doubled to 85 times. In 2000, the average CEO salary reached an unbelievable 531 times that of the average hourly worker. And now in 2011, after a decade it has reached unimaginable number. But with this would you not think isn't it too much? John Mariotti, president and founder of The Enterprise Group, said that as business becomes more complex, the demand for top executives increases and thus they command greater and greater pay. He also noted that such huge awards do little to motivate these outstanding performers, who are generally more motivated by challenge. Under new rules included in the Dodd-Frank financial regulations, nearly all public companies must now give shareholders a say on executive pay. Although companies will not be bound by such votes, they will have to disclose the results in reports filed with the Securities and Exchange Commission. Nearly half the U.S. companies surveyed by consulting firm Towers Watson were adjusting their pay-setting process ahead of the spring votes required at least every three years under the Dodd-Frank financial reform law. The Securities and Exchange Commission in 2007 ignited the trend of eliminating fringe benefits when it began requiring companies to provide detailed disclosure of perks. Say-on-pay votes are expected to accelerate the trend. Investors have usually been tolerant of high CEO pay when the economy is strong and companies are doing well. However, Occidental Petroleum, Motorola and KeyCorp, had their pay packages rejected last year. That number may grow as say-on-pay votes become widespread.

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