George W. Bush recently weighed in on the subject of excessive CEO pay, which we discussed here. The other day, Federal Reserve chairman Ben Bernanke mentioned that issue in the context of a growing income gap. An interesting piece by Albert R. Hunt in Sunday’s International Herald Tribune reinforces the view that CEO pay abuse is becoming a cause for more than just shareholder activists. Here is an excerpt:
There is hand-wringing in America over growing income inequality and excessive executive compensation.
The complaints are not emanating from populists on the left or ivory-tower academics. The Federal Reserve chairman, Ben Bernanke, devoted an entire speech this month to income inequality, worrying that it threatened “the dynamism” of capitalism. And President George W. Bush has been a critic of greedy executives.
Since most American households are invested in the stock market, directly or indirectly, and all Americans are affected by what major corporations do or fail to do, and especially how they are led, they have a stake in the subject of CEO pay.
Abuse in executive remuneration has become a symbol —a litmus test, if you like— for what is wrong with American business. It doesn’t take a Sherlock Holmes to detect that excessive top pay has been present in nearly every corporate scandal in the past quarter-century and has become the signature affliction of directors who do not direct. When it is present, you are almost sure to find misdirected boards oblivious to the ethical minefield over which they are stumbling, frequent corporate underperformance and CEOs whose Pharaonic paydays so well insulate them that many have lost touch with the realities that shape corporate success.