What is 'say-on-pay'?
This year marked the first year that say-on-pay and say-when-on-pay were mandatory voting items on company proxy ballots. Previously, these initiatives only appeared on the ballots as shareholder resolutions, meaning that they were non-binding and sometimes were not even permitted on the proxy statement.
However, the recently passed Dodd-Frank Act now mandates that both measures must appear on ALL company proxy ballots, giving shareholders the opportunity to voice their opinion about executive pay structures and compensation packages. If you think the pay is excessive for the management team, you now can do something about it by voting NO on your proxy ballot.
Gary Larkin?s recent post, 2011 CEO Succession Report: Dismissals Up, Outside Hires on the Rise, informs Conference Board readers that Institutional Shareholder Services has launched an executive compensation database service for its client subscribers. Say on Pay rules were the driving force behind the new service.
The database includes historical CEO and NEO (named executive officer) compensation data for more than 4,000 U.S. companies, together with Say on Pay data for the most recent reported period. Salary, bonus, stock-based incentive awards, option grants, non-equity incentive plan payouts, deferred compensation payouts and other components of total compensation are also included.
Meanwhile, Ronald D. Orol at MarketWatch warns Beware of Institutional Shareholder Services. ?ISS has flexed its muscle in skirmishes over executives who are paid from company coffers to cover millions of dollars of their golden-parachute tax liability? using tax gross-ups.
Yes, ISS is influential but they recommended against, as I recall, 12% of pay packages; shareowners only voted down 2%. That?s not a very high success rate on that front. With all the public outrage against high CEO pay, you would think that shareowners would not only vote with ISS on ?say on pay? but would go well beyond ISS recommendations, voting against the majority of packages. Can we hire excellent CEOs for less than the $9.3 million median for large companies? Yes, I think we can.
A huge chunk of stock is owned by mutual funds who don?t want to alienate potential clients for running 401(k) plans. However, another large chunk is owned by retail owners who don?t subscribe to ISS services.
The U.S. Proxy Exchange is trying to make it easy to decide which pay packages to vote against packages through guidance that takes 10 minutes. Top experts have weighed in on draft guidelines.
(Reuters) - Twenty-five of the 100 highest-paid U.S. CEOs earned more last year than their companies paid in federal income tax, a pay study by a Washington think tank said on Wednesday.
Compensation for the 25 CEOs with pay surpassing corporate taxes averaged $16.7 million, according to the study, compared with a $10.8 million average for S&P 500 CEOs.
The study found the gap between CEO and worker pay widened last year to 325 times the average worker's pay in 2010 from 263 times in 2009.
Several companies mentioned in the report took issue with its methodology and said they paid all taxes owed. A spokesman for General Electric called the study "inaccurate."
A separate study released by pay consultants Equilar found CEOs getting a larger slice of their companies' total options and restricted stock grants as well, including 7.4 percent of options in 2010, up from 6.2 percent in 2006.
The senior Democrat on the House of Representatives Oversight Committee, Elijah Cummings, called for hearings on executive compensation "to examine the extent to which the problems in CEO compensation that led to the economic crisis continue to exist today."
The institute compared CEO pay to current U.S. taxes paid, excluding foreign and state and local taxes that may have been paid, as well as deferred taxes that can often be far larger than current taxes paid.
The group's rationale was that U.S. taxes paid are the closest approximation in public documents to what companies may have actually written a check for last year to the Internal Revenue Service.
It said deferred taxes may or may not be paid.
Among the companies topping the IPS list:
* eBay whose chief executive, John Donahoe, made $12.4 million, but which reported a $131 million refund on its 2010 current U.S. taxes.
* Boeing, which paid CEO Jim McNerney $13.8 million, sent in $13 million in federal income taxes, and spent $20.8 million on lobbying and campaign spending.
* General Electric, where CEO Jeff Immelt earned $15.2 million in 2010, while the company got a $3.3 billion federal refund and invested $41.8 million in its own lobbying and political campaigns.
GE spokesman Andrew Williams said the study did not include significant income taxes paid in 2010 for previous years, or state taxes paid. "GE pays what it owes," he wrote in an e-mail response to questions.
In an e-mail response, an eBay spokesperson also disputed IPS' methodology, calling it a "misrepresentation" and saying the company "paid $646 million in taxes in 2010 globally, the majority in the U.S."
Boeing spokesman Chaz Bickers said the study was "simply wrong."
Instead of Boeing's reported "U.S. federal current tax expense" of $13 million that the IPS used, he said a better approximation of the company's taxes paid would be the $360 million it reported as its net income tax payments, most of which, he said, were federal.
"On federal cash tax payments last year we paid in the hundreds of millions," Bickers said. The company also received a $371 million credit from the government last year for overpayment of taxes in the past, and had added 5,000 U.S. jobs this year, in part because of federal tax breaks, he said.
The accounting used in SEC filings differs from the accounting used to tally what is owed on a corporate tax return.
Neither the IPS number nor the figure cited by Boeing exactly equals the check written to the IRS, said Scott Dyreng, an assistant professor at Duke's Fuqua School of Business, who studies corporate taxes. Although companies could disclose that figure, all tax returns are private.
The companies come from different industries, but their tax breaks fell into two primary areas, said Chuck Collins, an IPS senior scholar and co-author of the report.
Two-thirds of the firms studied kept their taxes low by using offshore subsidiaries in tax havens such as Bermuda, Singapore and Luxembourg. The remaining companies benefited from accelerated depreciation.
Shareholders have responded favourably when companies in which they invest keep a tax bill low through legal methods, thereby benefiting earnings.
But Collins said, "I think it's an exposure of weakness in a company if their profitability is dependent on their accounting department and not on making better widgets."
He said that in previous reports, out-sized CEO pay was often a red flag for bigger problems to come. The IPS has been compiling a pay report for 18 years. Among those whose leaders made the high pay list in years past and then had their businesses falter were Tyco, Enron and WorldCom.
we need to give these corporations more tax cuts to save the economy, obviously they are struggling....
The plan is simple....
1.) give corporations more tax breaks so they make more money
2.) something happens that magically makes corporations hire more people because they have more money
3.) everybody wins.....
honestly if the governments got together and all had a one year tax on ALL corporate profits and pay increases for workers making over 1 million we could solve this economic situation in a week as companies will "use it or lose it" it sounds and isn't "free market" but it would provide the kick in the pants the economy needs to get moving, no off shore accounts, no accounting tricks, just a simple invest your profits this year in expanding your company or lose it to the government type of deal. In the end everyone would benefit as the economy improves.