Special executive compensation section: CEOs call for stronger link between performance and compensation.This month, Chief Executive Magazine conducted extensive additional polling about all aspects of executive compensation. We asked what percentage of compensation is directly related to performance. The results below show that compensation related to performance drops as percentage increases. In addition, we asked how each CEOs compensation is decided upon, and how CEOs feel about how compensation of executives has been portrayed por·tray tr.v. por·trayed, por·tray·ing, por·trays 1. To depict or represent pictorially; make a picture of. 2. To depict or describe in words. 3. To represent dramatically, as on the stage. in the media. (see page 4 for more results) [GRAPHIC OMITTED] Compared to other high paying/high performing positions (e.g. actors, sports stars, lawyers, and other high paid professionals) are issues of executive compensation presented fairly to the public? No 65% Yes 35% Note: Table made from pie chart. This question allows us to see how CEOs perceive their position in the media. With almost 2/3 of CEOs holding the belief that issues surrounding their compensation are unfairly portrayed in the media, it is hard to claim that any media source is in the pocket of business. This negative perception is most likely due to the fact that scandals of extortion extortion, in law, unlawful demanding or receiving by an officer, in his official capacity, of any property or money not legally due to him. Examples include requesting and accepting fees in excess of those allowed to him by statute or arresting a person and, with , false accounting, and coverup are quite newsworthy news·wor·thy adj. news·wor·thi·er, news·wor·thi·est Of sufficient interest or importance to the public to warrant reporting in the media. news , but the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. who diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d follows the rules never makes primetime news. Asking CEOs what percentage of their pay was directly related to the performace of their company yeilded some interesting results. Most important to note is the mean differences between private and public companies. On average, 43% of the private CEO's compensation is determined by how well his/her company performs. By contrast, only 37% of executive compensation is linked to performance in public companies. [GRAPHIC OMITTED] Also of note in the graph below is that as the percentage of compensation related to performance increases, the percentage of CEOs accordingly compensated decreases. Reading the quotes by CEOs on the following page (The Quotable quot·a·ble adj. Suitable for or worthy of quoting: a quotable slogan; a quotable pundit. quot CEO), CEOs seem unhappy with this state of affairs. They are calling for more transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. in compensation reporting, as well as a desire to have more linkage linkage In mechanical engineering, a system of solid, usually metallic, links (bars) connected to two or more other links by pin joints (hinges), sliding joints, or ball-and-socket joints to form a closed chain or a series of closed chains. between performance and compensation. Handing out multimillion dollar checks (sometimes tens and hundreds of millions) to CEOs whose stocks are plummeting is not acceptable anymore. In polling CEOs for March, 2005, Chief Executive was able to separate respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. by the ownership type of their company. Over 75% of public CEOs reported that their pay was determined by either their Board of Directors or their Compensation Committee. This indicates a significant lack of control for CEOs to set their own pay by fiat [Latin, Let it be done.] In old English practice, a short order or warrant of a judge or magistrate directing some act to be done; an authority issuing from some competent source for the doing of some legal act. . Instead, this data, in combination with the compensation data presented below, indicates the real way CEOs are able to influence their compensation package is through performance. It is not the case, as the mainstream media suggests, that CEOs write the rules on their own pay. By contrast, 4 categories make up over 85% of the responses of CEOs in privately owned companies. These categories, ranging from the CEO to the Board to a group of partners to a Compensation Committee show that insiders most often decide executive pay in private companies. Shareholders and outside groups make up a small minority of those involved in determining executive compensation.
Who Determines Your Compensation Package?
Group that Determines Compensation Public Private
CEOs CEOs
You 1% 20%
Your Board of Directors 36% 31%
Your Executive Compensation Committee 40% 17%
Shareholders of the Company 2% 10%
Executives/Partners within the Company 18% 18%
3rd Party/Consulting Group 0% 1%
Other 3% 3%
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