Companies Look to Make CEOs Accountable
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NPR's Scott Horsley reports.
SCOTT HORSLEY: Mercer's Will Ferguson says companies are starting to treat executive stock grants as they would any other investment.
WILL FERGUSON: People are starting to look at it a little more closely and saying, am I really getting the bang for the buck here, in terms of how I'm spending this money?
HORSLEY: What's more, CEO's with options could sometimes profit from a rising stock market, even if their own leadership was lacking. In contrast, Ferguson says many of the new compensation plans are based on a wider range of financial targets, and they don't necessarily reward CEO's who simply follow a rising tide.
FERGUSON: So, for example, it's not just good enough to get to a certain level of return. You have to outperform your competitors to get an above-market kind of award.
HORSLEY: Some investors are skeptical, though, having heard this promise before. Managing director Alyssa Ellsworth, with the Council of Institutional Investors, says the new compensation plans are only as good as the financial targets they're pegged to.
ALYSSA ELLSWORTH: Pay for performance currently could mean anything to anyone. We've seen "pay for performance," quote/unquote, that's tied to increases in the amount of assets a company has, tied to, name it. Buying new construction sites. And so, what we often don't know is what that performance means.
HORSLEY: Scott Horsley, NPR News.
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