February 14, 2013
Are Rating Agencies Ramping Up to Publicly Warn on Excessive Executive Pay?
– Broc Romanek, CompensationStandards.com
In a blog entitled “Moody’s Warns Jeffries on ‘Excessive’ Pay,” Paul Hastings’ Mark Poerio notes:
This article from the New York Times begins: “To Moody’s, the high pay [of $78 million for top executives] is a reminder of ‘excessive compensation’ among Wall Street firms, potentially leading investment banks to take excessive risks and irritating critics on Capitol Hill and among regulators.” Fast forward to the proxy statement disclosure implications: How will the company handle its discussion of the riskiness of its executive compensation structures? Going to the design of the firm’s executive compensation, Moody’s has apparently expressed concern that “the firm has not put in place measures like longer award vesting periods and more expansive powers to claw back compensation . . . to ensure that employees will not suffer consequences from excessive risk-taking.” It will be interesting to see how the firm’s shareholders and proxy advisory firms react to the Moody’s report, and whether the firm’s compensation committee acts preemptively beforehand.
I can’t recall a rating agency ever making a concern over excessive executive pay public? Maybe the NY Times sleuthed this out. Or maybe it’s a new trend…