Search

Editors

Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

« Defense contractor claims yacht as Mississippi office, pays $220,00 to settle federal claims | Main | HSBC boss on the Panama Papers: ‘We welcome more transparency’ »
Friday
May202016

Barbara Brooks Kimmel: Searching for balance between trust and CEO performance-based pay

It’s executive compensation season at shareholder meetings and corporate boardrooms across America, and pay for performance continues to be a hot topic.

The intersection of CEO compensation, performance and trust is discussed in recent stories about:

Comcast

Comcast’s Brian Roberts Made $36.2M In 2015, Up 10% (here)

Comcast compensation: Michael Cavanagh is highest paid CFO in the nation (here)

Verizon:

Battle between Verizon and strikers enters endurance phase (here)

And Citigroup:

About One-Third of Citigroup Shareholders Rebuke Bank on Pay (here)

Research shows that performance-based pay can have dangerous outcomes for companies that implement it. Here's how much the best and worst performing CEOs get paid.

(To balance this post, I tried to find current research supporting positive outcomes of pay for performance at the CEO level but could not.)

I asked members of our Trust Alliance to read the articles above and answer this question:

From an organizational trust standpoint, what are the issues that these companies and others like them must address? Here’s what they told me.

On Comcast:

Curtis Verschoor, former Corporate Controller at Colgate Palmolive, reminds us that…

Investors trust boards and compensation committee members to exercise their overarching fiduciary duty to act in the best interests of shareowners. With six Comcast executives being given a total of $176.5 million in 2015, it is not clear this trust was deserved. It is also not apparent why Comcast requires the Wall Street expertise of Mike Cavanaugh, the highest paid CFO in the U.S.

Bill Benner asks…

How can shareholders really trust the Compensation Committee when it says it "maintains an objective stance" in setting Roberts pay when Roberts controls a third of the voting shares?  Are shareholders supposed to accept that at face value and not question the Committee's motives?

Michael Cavanaugh, CFO for Comcast, relatively new and paid more than CEO Roberts, conveys that financial matters are the principal driver of results at Comcast, possibly over everything else, including customer service.

And Bob Whipple adds the following…

You cannot have trust in an environment of blatant unfairness. If the executives are getting double digit compensation increases when the company is hurting, what do they get when times are good?

Brian Roberts had a tiny slice of his compensation increase earmarked for “other compensation” not big enough to delineate (only $4.1M), but his employees would like to know what “other compensation” really is all about.

On Verizon:

Bill Benner comments that…

The tension between Verizon workers and management over off-shoring, pay and benefits juxtaposed against individual executive compensation strikes a discordant view and outright image of top level corporate greed.

On Citigroup:

Curtis Verschoor said…

Citigroup’s board and compensation committees appear to have “checked the boxes” to fulfill their trust responsibilities, yet have failed to gain the support of highly respected investor advisory firms Glass, Lewis and Institutional Shareholder Services.

Bill Benner said…

One-third of Citigroup's shareholders' rebuke of the Bank's pay plan for top executives was likely long overdue.  Employees must perform in an outstanding manner to receive outstanding raises and so should executives.

What are measures to determine the appropriateness of the executive pay plans, how is that communicated to shareholders, and who is holding who accountable?

And Donna Boehme provides a macro summary of the issues raised in these articles and a roadmap on where to go next...

There’s a reason that Culture is the #1 issue Boards are taking up now- and that’s because they know a company’s culture trumps all else, including PR and good deeds in the name of sustainability. Almost every big corporate scandal we see in the headlines today can be tied to a failure of culture, trust and ethical leadership.

That’s why we are seeing more Boards and C-suites that are serious about culture and compliance turning to Compliance 2.0 by bringing on an experienced compliance subject matter expert in a leadership role that is structured to succeed, with independence, empowerment, line of sight, seat at the table and resources to do the job well.

And finally Curtis Verschoor wraps up our thoughts with this example from the world of sports...     

Bill Veeck, the sports business leader is quoted as saying: “It isn’t the high price of star [performers] that is expensive. It’s the high price of mediocrity.” (from May 5 Chicago Tribune). Investors need greater trust that executives with whom they have entrusted money will do well by them.

_____

Barbara Brooks Kimmel is the CEO and cofounder of Trust Across America-Trust Around the World whose mission is to help organizations build trust. Now in its sixth year, the program’s proprietary FACTS® Framework ranks and measures the trustworthiness of over 2000 U.S. public companies on five quantitative indicators of trust. She's also the editor of the award winning TRUST INC. book series and the executive editor of TRUST! Magazine. She can be contacted at Barbara@trustacrossamerica.com.