Major U.S. money managers say CEOs of big U.S. companies are overpaid, and they want directors to be held personally liable for serious financial improprieties, according to a survey on corporate governance conducted by Pearl Meyer & Partners, executive compensation consultants. Proposals allowing easier shareholder nomination of directors were favored by 66% of respondents.
The 88 respondents, from firms with a median $38 billion in assets under management, also "expressed widespread dissatisfaction with both the state of governance in corporate America and the cost to shareholders of compliance with Sarbanes-Oxley and other recent reforms," according to a Pearl Meyer statement.
Among the findings: 75% of respondents said the average CEO pay of $10.5 million at major companies is too high; 59% opposed golden parachute arrangements, which provide executives with financial protection in the event of a corporate takeover; 98% said directors should be accountable for certain financial irregularities; and 60% rated earnings per share - one of the most widely used criteria for determining executive bonuses - among the least useful barometers of company and CEO performance.
"The survey indicates that money managers are highly skeptical of the rationales behind some key longtime compensation practices," Chairman Pearl Meyer said in the statement.
Some 65% of respondents "rated shareholder return as the first or second most important factor in setting CEO bonus and long-term incentive payments," followed by 53% who cited return on capital, according to the survey.
Of six key Sarbanes-Oxley provisions, "only two were rated worth the cost of compliance by a majority of respondents: real-time disclosure of insider trading and the certification of financial reports by CEO/CFO, at 58% and 53% respectively," according to the survey.
Respondents strongly approved of mandatory option expensing, with 58% predicting the new options accounting will improve profit-loss statements.
