Gov't Report Suggests Conflicts of Interests in High CEO Pay (12/6/07)

A U.S. Congressional report released yesterday suggests a widespread conflict of interest among consultants who advise corporations on what they should pay their executives.

The report, commissioned by Henry A. Waxman (D), a California Congressman, found that supposedly independent compensation pay consultants often have other high-paying contracts with the companies they are advising on executive pay.

"Companies routinely justify outrageously high pay for executives by saying their compensation guidelines come from professional consultants," said RWDSU President Stuart Appelbaum. "However, this report shows an obvious conflict of interest. When the consultants receive high compensation themselves, they reward the CEOs of the company with high pay recommendations."

The report found that more than 100 large corporations in 2006 hired compensation consultants with conflicts of interests. Of those companies, 30 falsely identified these consultants as "independent" when filing with the Securities and Exchange Commission.

Executive pay has skyrocketed in recent years as corporations have sought to reduce the pay and compensation given to their non-executive employees. In 2003, the average chief executive got about 500 times the pay of the average workers, up from about 140 times as recently as 1991.