Pay Model Hurts Corporate Image

Aug. 20, 2006
But surveys differ on whether their pay is excessive.

Corporate directors and institutional investors generally agree that the way executives are paid in the United States detracts from the corporate image. But these groups disagree whether it has improved corporate performance or produced excessive compensation, says Watson Wyatt World, a global consulting firm.

A survey of 50 corporate board directors shows 79% believing the way executives are paid in the U.S. has tarnished the corporate image. A separate Watson Wyatt survey shows 85% believing that executive pay practices have hurt the corporate image.

However, while 65% of the directors believe U.S. executive pay practices have helped companies achieve superior performance, only 22% of institutional investors feel that way. A majority -- 90% -- of institutional investors say most executives are overpaid, and 87% say executives have too much sway over how their pay is determined. Corporate directors are less critical, with 61% stating most executives are overpaid, and 48% believing executives have too much influence over their pay.

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