Friday, April 27, 2012

Bloomberg Raises Questions On CEO Pay Methodology

This article (via Manan Shukla) questions the $69.9 million compensation awarded to the CEO of CBS.  It argues that CBS inflated the award by using much larger companies in the comparisons used to determine the award.  I think that it is important that Bloomberg is providing coverage on this topic.  The problem is that it only scratches the surface of the problem.  Comparisons that inflate the awards are only a small part of the problem.  Corporate boards, especially their compensation committees, are in the business of serving the CEO who often appointed the board members.  Warren Buffet, who has the strange view of basing compensation on  performance that is under the control of the CEO, claims that the boards on which he serves, keeps him far away from the compensation committee.  The compensation consultants, that are hired by the compensation committees, are selected for their skill in justifying the compensation level desired by the CEO and the compliant compensation committee.

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