A look at the reasons for the gap between high and low pay in the UK in recent years and why this matters

The UK High Pay Commission published its final report, Cheques with Balances: Why tackling high pay is in the national interest, shows stratospheric pay increases which have seen wealth flow upwards to the top 0.1% away from average workers.

It sets out a 12-point plan based on transparency, accountability and fairness.

Advertisements

Lloyd Who?

Goldman Sachs Group Chairman and Chief Executive Lloyd Blankfein received more than $54.3 million in cash, stock and options last year after leading Wall Street’s most profitable investment bank for just six months.

Blankfein, 52, named CEO in June after Henry “Hank” Paulson quit to become U.S. treasury secretary, earned $600,000 in salary, a cash bonus of $27.2 million, and $261,906 for such perks as a car, driver and financial counseling services, according to a proxy statement filed with the Securities and Exchange Commission Wednesday.

He also received $15.7 million in restricted stock, options to purchase 209,228 shares with a present value of $10.5 million, and $82,876 in “other” compensation, including company contributions to his pension plan, term life insurance and medical plans. (CNNMoney.com)

Commerce Secretary: Judge and Party

The system used to set executive pay at U.S. companies works and does not need intervention from the federal government, the commerce secretary. Carlos Gutierrez, who served as chief executive of food group Kellogg for five years before being appointed commerce secretary in 2004, said in an interview with Reuters that corporate mechanisms for setting pay are fine as long as compensation packages are disclosed and tied to performance.

“The solution here is not to have the federal government start getting into compensation control,” Gutierrez said. (…)

Says…

Gutierrez (…) penned a separation deal with Kellogg in 2004 that included pension benefits starting in 2009, lump-sum payouts under two Kellogg investment plans and his 2004 annual bonus. The pension payments will total $1.3 million a year, according to the deal. (CNNMoney.com)

Awakening the directors within

With the ouster of Home Depot‘s Bob Nardelli and his resultant compensation package that was valued at about $210 million and Pfizer‘s Henry A. McKinnell’s which came to almost $200 million, it has brought the spotlight on excessive compensation packages for CEO’s.

So far this year it looks like it may become the biggest issue at the annual meetings of public companies. According to Donald Delves, a Chicago-based compensation consultant one positive outcome of all of this is that “There’s a sort of silver lining to the whole Nardelli, Home Depot thing. At least the shareholders finally spoke up.” (managersrealm.com)

Two thoughts:
1. It’s about time!
2. And what of the Directors who represent the interests of shareholders?

Home Depot or Lowe’s?

[F]or any of those who still believe that pay has any relationship to performance, check out (Home Depot‘s ex-CEO) Nardelli’s pay relative to that of Robert Niblock’s at Lowe’s.

Over the last three years, Nardelli’s base salary, bonus, and other compensation (loan forgiveness) totaled $37.4 million – more than quadruple the $8.1 million that Niblock got! The picture gets a lot worse when you add in grants of restricted stock and options.

Over the last three years, Nardelli got almost $40 million in restricted stock, and over 1.7 million options. Niblock got $9.4 million in restricted stock and 272,000 options. (…)

[The] new Home Depot CEO Frank Blake has a radically different compensation structure than his predecessor. He may earn up to $8.9 million this year, but a hefty portion of that is at risk, and he has no severance package. (Money)

Director pay up 12%

Average board-member compensation climbed about 12 percent in 2006, to a mean of $160,439, according to a new study from Institutional Shareholder Services. Median pay increased 10.5 percent, to $143,123.

The increase was driven by a 16 percent rise in the value of equity-based compensation, according to the ISS, while the cash portion of a typical pay package rose just 5.2 percent. The study also observed, however, that stock options have a diminishing role in director compensation. (CFO.com)