August 21, 2008

Connecticut Treasurer Obtains Better Internal Pay Equity Disclosure

Recently, the Connecticut Treasurer – through the Connecticut Retirement Plans and Trust Funds – issued this press release to announce that it has withdrawn shareholder proposals at Abercrombie & Fitch and Supervalu after the companies pledged to disclose information relating to pay differences among top executives. Although it’s unknown whether these two companies will adopt all of the requested elements sought by the withdrawn shareholder proposals (their proxy statements have vague statements about use of internal pay equity), here are the four pieces of the internal pay equity policy that the Connecticut Treasurer proposed:

– The Committee should receive data on internal pay equity at peer group companies at least annually.
– The Committee should consider internal pay equity in (a) the establishment, modification and termination of senior executive pay plans and programs and (b) making specific awards under those plans and programs.
– The Committee should provide the internal pay equity data it receives, as well as any analysis performed by it or its outside advisors, to the board as a whole (or an appropriate Board committee) at least annually to assist in evaluating succession planning.
– The Company should disclose to stockholders on its website or in its proxy statement the role of internal pay equity considerations in the process of setting compensation for the CEO and other NEOs.

It will be interesting to see how more shareholders demand changes in board’s benchmarking practices in the near future. We have posted copies of the internal pay equity shareholder proposals in our “Internal Pay Equity” Practice Area on

Study: Leadership Pay Disparities

While we’re on the topic of internal pay equity, here is an interesting excerpt from Professor Lisa Fairfax posted on the “Conglomerate Blog“:

I recently ran across a 2007 study conducted by the Institute for Policy Studies, a progressive research center, which published figures on the pay disparities of various people in leadership positions. Based on 2005 and 2006 data, the study focused on the median salaries for the twenty highest paid individuals in various sectors. It found the following:

– Congress members: $171,720
– Military leaders: $178,542
– Federal executive branch: $198,369
– Heads of non-profit organizations: $968,698
– Heads of publicly held companies: $36.4 million

Recently, I posted this same blurb on “The Advisor’s Blog” on and received quite a variety of responses. Some criticized the way the study was prepared – some had a visceral reaction to the stats…

CEO Pay Remains in the News

Warning signs over excessive pay and those who won’t stand for it anymore continue to pop up all around us. For example, recently – as noted in this Washington Post article – the Maryland Insurance Commissioner cut in half the $18 million severance package paid to a former CareFirst BlueCross BlueShield CEO, saying the CareFirst board failed to restrain his compensation.

It’s also noteworthy that UnitedHealth Group has settled the two class action lawsuits over its options backdating for the unbelievable amount of $912 million (this is on top of the more than $600 million the former CEO has proposed to repay to settle the lawsuit against him). Shortly afterwards, the company announced it was laying off 6% of its workforce.

– Broc Romanek