CEO Pay: Adding insult to injury

A report that companies are already trying to circumvent the SEC's new regulations relating to more transparent disclosure of CEO Pay highlights the sorry fact that company managements still see themselves as a class apart that is able to run roughshod over the concerns of their owners and the wider public. The absurd system of 'incentive compensation' allows the CEO of Eli Lilly to get away with a whopping 45 per cent increase in 'compensation' for the year 2009. This brings the total to an eye-watering £20.9 million. But the company's management tries to put a different spin on it by claiming that 'fair value' (to whom?) of the CEO's compensation is only $15.9 million. Assuming that both valuations are correct this demonstrates that compensation for top executives is much too complicated in the first place. We guess that this is intentionally as it opens lots of opportunities to game the system. We wonder whether employees down the pecking order also have such difficulty valuing their pay packages. Both the percentage increase as well as the absolute number of pay for Lilly's CEO illustrate that reform of top executive pay is overdue.