In the aftermath of the financial crisis, the subsequent Occupy movement and the protests against the 1 percent, you might think that financial corporations would rein in the multi-million dollar salaries paid to their CEOs.
Instead, compensation to the best-paid CEOs at the largest U.S.-based financial companies collectively rose by an average of 20.4 percent in 2011, according to a new report from Bloomberg Markets magazine. This rise is even more surprising in light of the fact that 33 of the 50 biggest financial companies had negative share returns in their 2011 fiscal years. High-level investment managers maintain that many of the CEOs of companies with underwhelming stock performance are overpaid and warn that the controversy over executive pay in the financial industry will not be resolved until shareholders hold executives fully accountable for their under-performance.
How should we determine what compensation is reasonable for CEOs? How can shareholders or the U.S. Securities and Exchange Commission (SEC) limit compensation increases paid to executives when their respective companies lose value?
David Lewin, author and Neil H. Jacoby chair in Management at UCLA’s Anderson School of Business
Jeanne Branthover, managing director of Boyden Global Executive Search; head of the Global Financial Services Practice at Boyden. Founded in 1946, Boyden specializes in high level executive search across a broad spectrum of industries