Upfront: Executive Pay in the Crosshairs

Institutional investors are far from happy with the current level of rewards for top executives.

Institutional investors are far from happy with the current level of rewards for
top executives, according to research from Watson Wyatt Worldwide. The firm surveyed
55 institutions managing a total of $800 billion in assets and found that 90 percent
of respondents think today's compensation practices result in overpaid executives.
What's more, nearly two-thirds would like to see more stringent disclosure rules
for executive compensation.

"Companies should take these findings seriously," says Ira Kay, global director of
the compensation practice at Watson Wyatt's New York City office. "While many companies
are making progress in addressing these concerns, boards need to do a better job
of reassuring investors that they are intent on paying for performance."

Relief for institutional shareholders' concerns about transparency is on the way,
courtesy of the SEC. In January the commission voted unanimously to publish proposed
rules that would amend the disclosure requirements for executives' pay in proxy statements,
annual reports and registration statements. If passed, the rules would mandate clearer
and more extensive detailing of compensation packages -- including stock options
-- awarded to an organization's CEO and CFO, its three other highest-paid executive
officers, and its directors.