NYT Report on Executive Pay

By Cydney Posner

In Sunday's New York Times is a report on executive pay concluding that "companies filled their proxies with a blizzard of words and numbers that did more to obscure their processes than to illuminate them. And most irksome of all, true links between pay and performance remained scarce." Most notably, although performance-based bonuses were down last year, discretionary bonuses were more prevalent and higher. The report highlights among the most shameless actions the decision by Washington Mutual "that write-offs would not count when it calculated performance-based bonuses, a decision that one compensation expert referred to as calculating batting averages without counting strikes." Tax gross-ups appear to be another contentious area; in one instance cited in the report, tax gross-ups constituted almost one-half of the CEO's $8+ million annual compensation. Failure to disclose performance targets also earned some criticism, although the report does express the concern that pressing this issue too hard may cause compensation committees to "simply revert to easily quantifiable numbers like earnings per share, rather than complex long-term goals." The report notes that Home Depot, one of the companies that last year incurred the greatest wrath as a result of its compensation practices, was among the most evolved this year with a new CEO pay package that even Nell Minow viewed as "close to exemplary."

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