Does Executive Compensation Need an Annual Audit?
In a recent opinion piece on Forbes, Professor Edward E. Lawler III of USC's Marshall School of Business, and founder of the Center for Effective Organizations, proposed a very interesting concept. Addressing the issue of Say-on-Pay and executive payouts, Prof. Lawler suggests that perhaps every year there should be an annual audit of executive compensation as compared to the company's stated pay philosophy, performance metrics placed on the individual, as well as the company's performance as a whole. Prof. Lawler clearly understands that executive compensation is a complex issue, and it can be difficult for a shareholder to obtain all the information needed to make a educated vote for or against the executive pay packages. The annual audit would help provide the shareholders more insight than just shareholder return in the previous (which is what is used in ISS/RiskMetrics when they make recommendations for or against companies).
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