Monday, January 03, 2011

On overcompensation

Plenty of others are rightfully highlighting the CCPA's annual comparison of enormous executive salaries to the relatively tiny amounts paid to mere workers in general. But perhaps the most important piece of news in this year's article is that the corporate sector has responded to pressure on the amount being paid to declining to report on how much executives actually make:
The CEO pay figures may even be underestimated owing to a change in the way stock option compensation is reported, according to the report.

Corporations used to report the amount of income that executives actually realized when they cashed in their options.

Beginning in 2008, rather than reporting the amount their executives realized during the year by cashing in options, they reported a statistical estimate of what the options might have been worth in the market when they were granted.

The centre argues in its report that the amounts reported tend to be understated.
Which offers reason to suspect that even the glaring 155-to-1 gap being reported today between may in fact be even higher if one takes into account actual amounts cashed in by top executives rather than an easily-manipulated estimate (which executives would have every incentive to deflate in order to give the perception of adding share value over time). And the fact that corporate reporting is apparently moving further and further away from acknowledging the reality of executive income should give us reason for concern that it's going to spiral even further out of control in the years to come.

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