Are executives overcompensated or is it mostly media hype? That’s just one of the questions speakers strove to answer at Executive Compensation 2008, a forum recently held in Toronto to discuss new developments, ideas and solutions in executive compensation, sponsored by Osler, Hoskin and Harcourt LLP. Sandra Cohen, a partner practicing executive compensation law at Osler, chaired the event.
Joann Lublin, management news editor of the Wall Street Journal, and Dr. William Dimma, dean of the business school at York University, provided two possible answers to the question: does the media over-sensationalize executive pay?
Lublin remarked that readers care about executive pay because of the negative perception of generous exit pay provisions (viewed by the public as “pay for failure”) and also because there are so many wealthy executives. “Nothing is as green as money, except for envy,” she said.
She identified a few U.S. compensation trends that will likely make their way to Canada, such as “say on pay” (where shareholders have a say in how executives are compensated), a closer look at “pay for failure” provisions and a focus on internal pay equity—particularly, on the spread between the chief executive officer and other named executive officers. She also noted that she’s seen a greater focus recently on deal “optics”—how pay and other compensation elements appear from the media’s perspective.
Lublin closed by offering a few tips for handling media inquiries. When it comes to executive pay, transparency and disclosure are particularly important. “If you are committed to a philosophy of transparency in your dealings with the media, in your proxy, in your public disclosures—you shouldn’t be getting a lot of questions from the media,” she added. If the information to be released could be controversial or complicated, she suggested holding briefings before the proxy release, as well as offering media interviews with relevant external advisors.
Her final words of advice: “Don’t pretend to know more than you do. Don’t fudge the facts. Don’t make lame excuses for something you can’t justify.”
Dimma’s response focused on the theme that “bad news sells papers.” In his view, media coverage of business affairs can lead to “smears insufficiently supported by the facts, and can also segue into petty criticisms that cast corporations and their leaders in more unfavourable lights than warranted.” He noted that if the company is performing well, how executives are compensated isn’t really an issue.
Citing the recent bad press that Tim Horton’s has received, he remarked that “media glee and media gloating at a Canadian icon seemed at times like a ‘gotcha’ at the corporate world in general and at its leaders, portrayed as ‘fat cats’ with lifestyles that few journalists…will ever see.” Similarly, he pointed out that media coverage of the Bank of America’s cost-cutting measures created links between the story and the chief executive officer’s compensation, turning it into a “Marie Antoinette morality tale.”
In closing, Dimma urged the media to “know their areas of expertise far better than most of their readers”—particularly when expressing personal views on complex issues—and to continue to “fight the good fight.”
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