Law, Business and Society 11th Edition by Tony McAdams

Exercise 6

Executive compensation has long been an issue for shareholders. The 20th-century American economist John Kenneth Galbraith observed that "[t]he salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself." It is also an issue that is likely not to go away soon. In the late 1970s CEOs earned 30 to 40 times the income of average workers; by 2007, CEOs of large public corporations earned 344 times the income of average workers. The Dodd-Frank Act now requires that the ratio be disclosed annually. It also requires disclosure of the relationship between executive compensation and the financial performance of the company, giving consideration to both stock price and dividends. Efforts to control executive compensation appear to have borne little fruit. In 2012, the compensation of the top 200 CEOs of publicly traded companies increased 16 percent to a median of $15 million. The highest paid was John Hammergren of McKesson, who received $131 million. In addition, the average perquisites for the 100 highest-paid CEOs rose 19 percent to $321,000.
By 2007, CEOs of large public corporations earned 344 times the income of average workers
Dodd-Frank also includes a say on pay provision requiring companies to put a separate, but nonbinding, resolution before the shareholders to approve the compensation paid to senior executives. This seems to have had little practical impact. During 2012, shareholders upheld about 98 percent of pay proposals. Interestingly, the Swiss enacted a law providing for a binding shareholder say on pay for its executives.
How is the "war" on excessive executive compensation faring