CEO Raises Under Scrutiny
Most CEO’s don’t wake up in the morning, look at themselves in the mirror and say, “Regardless of my company’s overall performance, I deserve a raise!” In reality their companies usually hire consultants that determine CEO pay. And now those consultants are under scrutiny.
Yesterday Rep. Henry A. Waxman, D-Calif and chair of the House Oversight and Government Reform Committee, sent a letter to the top 250 Fortune 500 companies asking who these consultants were and how they determine executive pay. Do the consultants do other work for the company? Are multiple consultants hired or just one? Is their boss the CEO? Do shareholders know about any of this? Company employees?
Despite public hand-wringing over the fact that CEO’s of the largest companies make about 600 times more about the average employee, the people recommending these salaries, however, are largely a mystery. A December Oversight Committee hearing reported that CEO’s at 113 of the top 250 companies, had consultants who performed other roles with the corporation. In other words, the consultant may be telling their boss whether they deserve a raise.
With the looming recession, their might be growing public momentum to probe the otherwordly pay of CEO’s. Indeed, the oversight committee’s general investigation will hold a hearing on the well-compensated CEO’s of companies responsible for the subprime mortgage crisis.
So these could be high-anxiety times even for the super-rich.