A current hot topic is the level of CEO pay at large public companies. It’s hard for many to comprehend salary and benefits in the tens or hundreds of millions of dollars. When the average person thinks about this kind of pay, it’s only natural to assume it’s excessive and needs to be brought under control.
To some, the issue is one of fairness and equity between upper management and front-line employees. To others, the idea of such a high level of pay invokes thoughts of fraud and accounting manipulation. Economists, journalists, and ordinary consumers have been weighing in on this issue, but what’s the big deal?
Well it’s clear that the issue is hot. In 2006, the Securities and Exchange Commission changed the rules regarding executive pay to force companies to disclose more information about the pay and perks. The rules don’t limit the pay and benefits, they just require the companies to tell the public more.
Whereas public companies used to be able to load the compensation packages with pension plans and severance packages that didn’t need to be fully disclosed to the public, now the rules require much more information to be divulged.
Public companies must also give information about the three highest-paid employees in policy-making positions, and they must give more information about stock options granted to employees. Any perks totaling more than $10,000 per employee must be disclosed. And companies are required to make the pay and perks easier to find in SEC filings by providing a “Summary Compensation Table” that gives a bottom line number for total pay for all upper level executives.
Up Next: Correlation between executive pay and fraud?