A new study finds that institutional investors and corporate directors are at odds on the future of the American executive pay model, but agree that the current system has hurt corporate America’s image.
Conducted by Watson Wyatt Worldwide, the study finds that 63% of directors feel the system is improving, compared to only 36% of institutional investors. When asked if the pay model has improved corporate performance, 65% of directors said yes, compared to 39% of investors.
Regarding the system’s effect on America’s corporate image, most directors and institutional investors agree (75%) that it has been detrimental. Both groups also agree that executive pay levels have become excessive, and that employee resentment has increased as a result.
“While directors and institutional shareholders agree on key executive pay issues, they don’t see eye-to-eye on other areas,” says Ira Kay, global director of compensation consulting at Watson Wyatt research. “While directors believe the system generally works, institutional investors generally feel the model’s flaws run deeper and require more substantial changes. Clearly, more work needs to be done.”
According to the study, both directors and institutional investors feel the Securities and Exchange Commission’s new disclosure requirements have helped to improve the situation, although further changes are required.
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