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Executive Pay Scrutiny Spreads

Rumblings to cap top compensation at $500K still heard on Capitol Hill.

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While the American Recovery and Reinvestment Act signed by President Obama on Feb. 17 aims in part to appease the furor over excessive pay for the financial services executives who engulfed the world in economic turmoil, the $787 billion package also serves as a warning to all companies, especially their board compensation committees, to re-evaluate their own executive pay structures. “They would be smart to behave like they, too, are under the gun,” says Alexander Cwirko-Godycki, research manager at Equilar Inc., a Redwood Shore, Calif.-based compensation research firm.

“Absolutely obscene,” is how David O’Brien, former director of treasury operations at Fidelity Investments, describes the bonus bonanza in financial services. “These firms have senior managers making tens of millions of dollars who failed miserably in doing their jobs. This was supposed to be `pay for performance.’ These people drove their companies into the abyss. I see the `pay,’ but where was the `performance?’” says O’Brien, now president of treasury management consultancy Enlightening Enterprises.

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