June 1, 2012
Peer Group Benchmarking As Tool To Rein In Pay?
– Broc Romanek, CompensationStandards.com
I’m still in the camp that peer group surveys aren’t an inherently evil thing in isolation – but that the heavy reliance on boards on them to pay CEOs in the top quartile over many years has unfortunately tainted the pay databases so much that the data is useless unless there is some sort of reboot. That’s why this blog by Steven Kittrell about how some New York agencies have proposed the use of benchmarking to limit pay made me smile. The proposal is that if pay exceeds $199,000, the total pay cannot be greater than the 75th percentile of comparable executives of comparable companies (as to size and services) in a comparable geographic area. The slippery slope downwards.
I imagine that if this type of proposal was ever floated for public companies, many of those that blindly follow benchmarking today would suddenly find religion and claim that boards should have the discretion to set pay levels based upon their own circumstances and that benchmarking should barely even be considered…