Why CEOs are paid so much – CNN

Most big public companies are now required to provide shareholders with a vote on CEO compensation under the SEC’s Say-on-Pay rule. The vote results are not binding, so don’t require the board to take action. But they do let boards know how shareholders feel about the issue. The rule has only been in effect for 8 years. But so far this year, investors have rejected only 2.5% of pay package proposals, and the rate was similarly low last year, according to David Kokell, director of US compensation research for Institutional Shareholder Services.
Since the Say-on-Pay rule went into effect, CEO pay has actually risen. Still, Kokell said, “[the rule] has likely slowed the growth of pay. And it certainly has had a dramatic impact on the composition of top executive pay — resulting in widescale shifts to performance-conditioned pay opportunities.”

Even with that shift, though, it still can be hard to decipher just how well CEO pay is aligned with performance and shareholder value. CEO compensation packages have so many moving parts that pay out over time. And different corporate actions, such as stock buybacks, or the use of different accounting methods, can change the very targets that CEOs are supposed to hit under their pay incentive plans.

via Why CEOs are paid so much – CNN

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