Executive bonuses make a comeback
CHIOTAKIS: Bonuses at some of the nation’s biggest companies have rebounded in fast fashion. The Wall Street Journal commissioned a study of 50 major corporations and their executive pay. It shows bonuses were up a median of more than 30 percent.
Joann Lublin is a reporter for the Journal and she’s with us live from New York. Good morning.
JOANN LUBLIN: Good morning Steve.
CHIOTAKIS: So, really a 30 percent rise? Why?
LUBLIN: Well, it’s actually closer to 31. It’s 30.5 percent. And this is actually the biggest gain in bonuses we’ve seen for CEO pay in at least three years. But for many of these CEO, it’s coming after a year in which they got little or no bonuses in 2009. So this is a bounce back that reflects the recovery.
CHIOTAKIS: How do these CEOs explain the increased bonuses. Is that what they’re saying? That, “Oh, I didn’t get a bonus last year so this is making up for it?”
LUBLIN: Well the CEOs don’t get to choose how much of a bonus they get. That’s decided by the boards. But what we saw in some of this data is that the profits at these companies did not climb as quickly as did the bonuses for the CEO. But net income only went up about 19 percent. And the reason there is that early last year when these boards were deciding what kinds of targets to set for their CEOs, some of them kind of lowered the bar a little bit, and so it was kind of easy to hit a home room.
CHIOTAKIS: Wow, the new financial overhaul law made it a requirement that investors have a say on executive awards right? Has that changed the way bonuses get handed out?
LUBLIN: Not really, because it’s quick early in the game. Only in annual meetings that have been held since the end of January have these kinds of votes been required. And at the end of the day, how the shareholders vote is nonbinding. It’s totally an advisory measure. The board can decide to ignore the vote if the shareholders give thumbs down to their executive pay practices. And that’s already happened frankly at two companies and not much has changed.
CHIOTAKIS: All right. Joann Lublin from the Wall Street Journal. Joann thank you.
LUBLIN: You’re welcome Steve.
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