Transcripts

Reining In CEO Pay & Perks

SUSIE GHARIB: It looks like many CEOs in corporate America were well paid last year. A survey of 350 publicly traded U.S. companies shows CEO pay increased nearly 9 percent in 2006. The Securities and Exchange Commission is now requiring greater disclosure on executive pay packages. And as Stephanie Dhue reports, that has some companies changing how they pay the boss.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Country club memberships, chauffeured cars, even reimbursement for income taxes. Those are just some of the perks CEOs have enjoyed. John Castellani heads the Business Roundtable, an association of CEOs. He says perks are problematic.

JOHN CASTELLANI, PRESIDENT, BUSINESS ROUNDTABLE: Perquisites should only be for paid if there is a direct business need for being reimbursed for that purpose. If not, compensation should be balanced, should be in cash, should be in equity, should be for the long term results of the company. So I think you'll see more and more companies get away from perks and go to things that are better aligned with the shareholders interest.

DHUE: Still, the average CEO received nearly $200,000 in perks last year. But there are extremes. For example, corporate governance researchers at the corporate library say R. Chad Dreier, CEO of Ryland Group, whose compensation was $31 million, received an additional $7 million in perks and benefits. That included the payment of taxes on stock options grants, reimbursement for personal health and services and charitable donations made on his behalf. Executive pay packages are under increased scrutiny because of the new disclosure requirements. TIAA-CREF's corporate governance director John Wilcox is judging companies this year based on how well they explain their executives pay packages.

JOHN WILCOX, SR. VP & HEAD, COPORATE GOVERNANCE, TIAA-CREF: We're not really interested in micromanaging how much companies pay their executives. We don't want to substitute our judgment for that of the directors and the management of the company, but we want the ability to let them know if we're not happy.

DHUE: This proxy season, shareholders will vote at more than 60 companies on proposals giving them a say on pay. Today, 37 percent of Morgan Stanley shareholders and 47 percent of Bank of New York shareholders voted for a say on pay. While those vote fall short of the 50 percent needed to force the boards to adopt the measure, supporters are encouraged. Richard Ferlauto is with employees union AFSCME, which sponsored the proposals voted on today.

RICH FERLAUTO, PENSION DIR., AFSCME: I think shareholders are rallying around the concept and are going to be pushing to get a greater voice when it comes to compensation.

DHUE: Say on pay legislation is also moving through Congress and a dozen S&P 500 companies are studying how to adopt the idea. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.