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04/21/2009

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Compelling article and blog, Doug. One of the things to consider in the discussion of executive pay is that base pay contributes very little to total compensation. I realize that stock and stock option values have taken a dive for executives, as well as for the rest of us, but it is incentive compensation - or total compensation as a whole that one must look at. At various times, I have seen base pay halted, while the less visible incentive pay - particularly bonus - surges forward to make up for it. In this day and time, the use of incentive pay to make up for losses in base pay increases is a risky move, even in the executive quarters. With all of the eyes of the SEC, stockholders, and IRS on executive pay and the logic of its formulation (particularly in the expanded CD&A notations on the proxy statements detailing such logic and performance measures behind the compensation plan design), the CEO's chambers and hopefully the Compensation Committee will warn against anything that lacks transparency in the plan.

Ah..
I meant to say, in the last sentence, that hopefully the Compensation Committee will advise the CEO wisely and warn against a lack of transparency represented by an in increase in incentive pay while reducing base pay.

Hi Doug. Doesn't all of this lead back to company performance -- as in, is the compensation warranted -- and what effective performance really mean?? The numbers paint a vivid picture, but strategic insight via sound measures are also what we should rightly be expecting from responsible leaders. If Boards are appointed responsibly, they should be the first to ask these questions.

Yep . . .

Great post, Doug! Margaret, your point about the degree to which the compensation is linked to sound measures is also well taken. Assuming sound measurement, executive compensation should, to some extent, be considered and weighed relative to the performance value delivered for owners/shareholders. It would be interesting to see a corresponding line for "median" corporate performance or value creation along with the pay line on the chart - although I have a feeling it might not leave us convinced that the increasingly levels of compensation are commensurate with "typical" performance actually delivered.

The content of the image appears to be placing the blame on FW Cook.

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