Obama Takes Issue with CEO Pay in Campaign Ad

by Judy Warner

A political ad for Democratic presidential hopeful Sen. Barack Obama (D-Ill) airing in Boston over the weekend takes issue with what is described as the excessive compensation of America's top corporate executives and the growing wage gap between rich and poor.

 

At a Directorship Roundtable on compensation trends last month [see complete coverage of the Roundtable in the upcoming December issue of Directorship], Harvard Business School professor Jay Lorsch predicted the issue of executive pay would remain a hot topic, fueled in part by presidential campaigning.

 

The populist issue has been fortified by the exit package most recently of former Merrill Lynch Chairman and CEO Stanley O'Neal, who resigned with a compensation package valued at $161.5 million. It is worth noting that O'Neal's package was in the form of securities and retirement funds promised to him well before Merrill reported a record $8.4 billion writedown of subprime mortgages.

 

The public perception, however, is that O'Neal, like others before him, is being rewarded for poor performance. That was a point made earlier this month by Senate Banking Committee Chairman Christopher Dodd (D-CT), among Obama's rivals in the Democratic race for the party's nomination, who has said his committee may proceed with legislation aimed at reining in excessive executive pay.

"There's a lot of controversy, mostly on the other side," Dodd has said. "We'll try to get unanimity where we can. But there's a possibility we'll move on it."

 

A bill to give investors a non-binding vote to protest excessive compensation was approved by the House of Representatives in April, almost four months after Home Depot Inc.'s ex-CEO, Robert Nardelli, got a severance package valued at $210 million.

 

Dodd hasn't yet called for a hearing on the legislation, introduced in April by Sen. Obama that was similar to legislation that Representative Barney Frank pushed through the House.

 

Dodd is studying initiatives "that would improve shareholder rights and input in the executive compensation process," his spokesman, Marvin Fast, said in a statement. Ideas include giving the SEC more authority to compel disclosure about pay packages and improving shareholders' access to corporate ballots.

 

Opponents of say-on-pay proposals would rather not see the government micromanage the work of boardroom directors. Say-on-pay proposals giving shareholders a vote on executive compensation have passed at such companies as Ingersoll-Rand, Blockbuster, Motorola, and Verizon Communications.