Maybe, at last, corporate executive pay is being tamed.
Three years ago, Business Week magazine headlined a story on
executive pay, "The Gravy Train May Be Drying Up."
It didn't happen. Last year, chief executive officers at 350
large American corporations enjoyed an 8.9 percent average boost in
direct compensation (salary, bonus, benefits, and long-term
incentives), finds Mercer Human Resources Consulting, in New York.
Median compensation for the CEOs was $8.2 million. Half got more,
half got less.
But Congressman Barney Frank, the Democratic chairman of the
House Committee on Financial Services, suspects that a bill passed
by the House April 20 "will retard that rate of growth
substantially." Over time, he said in a phone interview, the gap
between the pay of the top boss and that of average workers could
For most working Americans, at least those who didn't get a
promotion or take a better job, their inflation-adjusted pay has
been falling or flat for many years.
By 2005, the CEO-worker pay gap had grown to 411 to 1, compared
to 107 to 1 in 1990 and 42 to 1 in 1980, according to United for a
Fair Economy (UFE), a liberal advocacy group in Boston. A CEO makes
more pay on Jan. 1 than most employees get for a full year of work.
"All the economic benefits of the last two decades are going into
the pockets of the people at the top," complains Michael Lapham,
director of UFE's Responsible Wealth project.
Gradually, Americans have become more aware of what critics term
"obscene" or "greedy" executive pay packages. Frequent scandals
involving executives cooking corporate books and backdating stock
options to their financial benefit have further damaged their
reputation. And now the politics have changed.
Addressing business leaders on Wall Street in February, President
Bush said, "The salaries and bonuses of CEOs should be based on
their success at improving their companies and bringing value to
There's no correlation between CEO pay levels and corporate
performance, charges Mr. Frank, a Newton, Mass., representative.
Frank's bill passed by a 269 to 134 majority, with the support of
40 RepubA-licans. It requires that shareholders (the owners of
public corporations) be allowed to vote every year in an advisory
capacity on compensation packages.
If, in the future, the compensation committees of boards that set
CEO pay levels tend to ignore the objections of many shareholders to
high executive pay packages, "then we will do something more," Frank
Frank's "say on pay" bill was quickly introduced in the Senate by