Munger, Tolles & Olson corporate partner Robert Denham was recently featured on CNBC’s the Closing Bell with Maria Bartiromo discussing a report released today from The Conference Board's Task Force on Executive Compensation, which he co-chaired. The report calls for assuring a link between pay and performance and describes best practices for compensation.
“We’ve seen executive compensation grow at a much faster rate than the general economy, causing a lot of public concern that this is pay not for performance, but pay for failure. It’s created a risk that corporations might lose the ability to use compensation as it ought to be used--as a way to drive business performance,” Mr. Denham told The American Lawyer.
The current economic crisis, precipitated by the meltdown in the financial services industry, has led to a loss of public trust in corporations and other institutions. Executive compensation has become a flashpoint for this frustration and anger. The task force’s report and recommendations, sets forth Guiding Principles, which it believes, if appropriately implemented, can restore credibility with shareholders and other stakeholders and trust in executive compensation pay processes and oversight.
Companies are keenly aware that the government is looking at ways to rein in compensation and could soon dictate how firms pay employees, Mr. Denham, co-head of the Conference Board's task force, told The Wall Street Journal.
“There was concern about some of the compensation practices and concern that if companies don’t show that they use compensation effectively, their flexibility to use it may get substantially impaired,” said Mr. Denham, who once headed the former brokerage firm Salomon Inc.