Waxman Committee Seeks Audit Chairs to Provide Insight On Comp Consultants

The Oversight and Governance Reform Committee is looking for the chairs of compensation committees at each company within the Fortune 250 to provide information on how they utilize compensation consultants in setting executive pay. The inquiry is part of an ongoing investigation into the role comp consultants play at large publicly traded companies.

The Committee held a hearing in December to examine consultants’ roles in advising boards on CEO pay, and whether or not those consultants have conflicts of interests. During the hearing, the committee’s Democratic chairman, Henry A. Waxman, discussed a report – composed by his staff over the previous seven months – when he explained that what he deems to be high pay packages for CEOs could derive from potential conflicts of interest on the part of compensation consultants that boards hire to advise them on pay, and also by those same executives to consult on compensation inside the company and provide other services.

Waxman recently since sent a letter to Fortune 250 comp committee chairs, explaining that corporate governance experts have recommended that directors hire independent CEO pay consultants that can provide objective advice regarding compensation. The letter asks the chairs for information from January 1, 2006 to the present regarding who has retained current consultants at the companies, and whether the company has disclosed information to shareholders regarding other services provided by the consultant, if one has done so.