Institutional Investors Come Down Hard On Executive Pay

Institutional investors and corporate directors are sharply divided on the impact of executive compensation packages, according to a new Watson Wyatt Worldwide survey. First, the survey found that eight out of 10 corporate directors polled agreed that compensation that seems disproportionate to performance has tarnished directors’ images, but a small number defended the pay packages. Roughly two-thirds of directors feel the executive pay model resulted in better corporate performance, and 61% believe most executives are overpaid. Institutional investors had a different view: Just 22% said high pay meant better performance, and 90% said most executives were overpaid. In addition, 87% of the investors claim executives have too big a role in determining their pay package, while only 48% of directors shared that view. “Despite major reforms,” said Ira Kay, Watson Wyatt’s director of compensation practice, in a release, “executive pay and corporate governance continue to be a source of controversy.”