International Herald Tribune Editorial - A say on executive pay

International Herald Tribune Editorial - A say on executive pay
Copyright by The International Herald Tribune
Published: May 28, 2007


Executives have always been at the top of the corporate pay scale, but as the gap with average workers widens, more people have been asking how much is too much.

Shareholders of Verizon Communications recently passed a measure that would give them an advisory vote on compensation packages for top executives. The House of Representatives, meanwhile, has passed a bill that would give nonbinding votes on pay to all shareholders, like those that Britain and Australia already have.

The board of directors at Verizon could ignore the vote if it chose to; shareholders elect board members to make policy, after all. But they would be wise to listen. Ignoring this message would likely give impetus to the legislation in Congress, which is not the place to set salaries, or prompt shareholders to return with a binding proposal.

The real value of say-on-pay is not to slash executive salaries as a matter of principle, but to force corporate boards and their compensation committees to better explain their decisions.