Executive Decision - March/April 2008 - (Page 32)

cover story of public companies. SarBox also addresses auditor independence, internal controls, corporate governance and financial disclosure. The SEC amendment to its disclosure requirements: Provide investors with the total compensation of the corporation’s top five most highly compensated executives; provides for a narrative Compensation Disclosure and Analysis (CD&A) to be filed with the SEC; adds a description of payments made to executives upon termination or change in management and guards against backdating and “spring-loading” of stock options. This applies to all companies that file with the SEC. Kaplan adds: “There will probably be fraud in the future but today the scrutiny and incentives are much stronger on the side of ferreting out fraud than allowing it to go on.” He adds that the regulations might have gone too far. “I think Section 404 of SOA has gone too far by adding more bureaucracy than is probably desirable.” Lorsch says, “I think we have the safeguards in place, but people are always capable of finding new ways to do things outside the rules,” he says. “We’ve covered everything we can think of for the time being until people devise new ways to cheat.” Is Executive Compensation Too High? The End of Abuses? While the safeguards are in place, Dye points out, “I think it’s impossible to totally eliminate fraud. With SOA reforms and the related SEC requirements, I believe corporate directors feel much more empowered to do a better job.” In tandem with the disclosures of corporate fraud were the revelations about the excessive levels of executive compensation especially for executives managing poorly performing firms. While SOA and the SEC regulations address “obscene” levels of compensation, the key question that frequently arises: Is executive compensation today too high? Kaplan thinks not. “If anything I think it’s too low,” he says. “CEO pay is lower today than it was in 2000 in real dollars. Disclosure Creates a Cottage Industry At least one company While an S&P (Standard & Poor’s) 500 CEO’s package is still around $10 million a year, if you run a company of that size you generally have more than 25,000 employees. There are plenty of investment bankers and hedge fund managers who seems to be making money make that kind of money and have much easier jobs.” from the increased emphasis Dye adds, “Everybody would agree that in some cases, on corporate transparency and disclosure. Elizabeth Halaki Chief Marketing Officer compensation might not seem to be merited by the performance of the company. There is no consensus whether you can blame non-performance on the company or the executive,” he says. “But the compensation process is becoming more rational. There are some institutional shareholders that are rigorously Océ Business Services, a company that focuses on Océ Business Service records and documents management, is seeing increased activity helping companies meet the disclosure/transparency guidelines. According to Elizabeth Halaki, chief marketing officer, “If you are not managing your documents well and you are not managing your records, you may not be able to comply with the new regulations and that makes the problem more than just a matter of ethics and best practices, it’s a matter of being subject to very heavy sanctions.” Alan L. Dye Partner Hogan and Hartson 32 EXECUTIVE DECISION I execdecision.com http://execdecision.com

Table of Contents Feed for the Digital Edition of Executive Decision - March/April 2008

Executive Decision - March/April 2008 Contents Index of Advertisers Contributing Editors From the Editor's Desk Publisher's Note You Be the Judge - Unionization Thought Leader - Pitney Bowes Management - Flying High for Long-Term Results Strategies - Sovereign Wealth Funds Cover Story - In Whom Do We Trust? The Movement for Greater Accountability & Disclosure Finance/Legal - The New Boycott Model Green At Work - Transforming for Sustainability Technology - Embracing Risk Leadership - Executive Reputation Management The Global Village - China Moves to Curb Prices Economic Profile - California Gold Rush Transformations - I Can See Clearly Now, The Brain Is Gone Marketing - Effectively Using Market Research The Bottom Line - Brands: A Shrinking Advantage or Shifting Advantage? Pulse - Pandemic: Not If But When SPECIAL SECTION - Living On the Green: Luxury Golf Destinations

Executive Decision - March/April 2008

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