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Tuesday, 23 September 2008 |
Executive Compensation Needs Independent Review, Ties to Company Performance
Responding to the controversy in the current crisis in financial markets, CED, today reemphasized that truly independent compensation committees of corporate boards are the key to bringing executive pay in line with company performance. "If the Treasury is to buy questionable financial assets to shore up firms' balance sheets, the nation should require that those firms adhere to the best practices to determine fair executive compensation, based on performance. Shareholder and public confidence can be reestablished only by prudent pay packages tied to performance, with no outsized severance packages," said CED Trustee and former SEC Chairman, Roderick M. Hills. Mr. Hills chaired the CED Subcommittee on Corporate Governance which produced the 2006 report Private Enterprise, Public Trust: The State of Corporate America After Sarbanes-Oxley.
CED says that top corporate executive pay too often reflects neither market conditions nor individual performance and the solution is a matter of process and disclosure - which is all the more important in the financial legislation now being considered. Indeed, adherence to best practice should be a precondition for assistance from the public purse. (read more)
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