April 8, 2005
Securities and Exchange Commission
Dear Securities and Exchange Commission,
I am writing to urge the Securities and Exchange Commission to act on its proposed rule making on executive compensation disclosure. Too often executives are richly rewarded even when their companies' performance is below par. Without better disclosure, shareholders, employees and the general public cannot evaluate whether executive pay packages are unjustly enriching executives at shareholder cost or providing fair compensation.
The newly proposed rules will make this crucial information more accessible to shareholders and the public. The new requirements to disclose total compensation figures, pensions and detailed compensation breakdowns will make it clear exactly how much top executives are earning and why.
I believe that CEO pay should be set by independent directors. Under the proposed rule, a director could secretly do $120,000 in business with a company, an amount that is more than four times the average worker's annual pay of $27,460. Shareholders should be told if directors have potential conflicts of interest, no matter what the amount.
Not long ago I saw a story on the news regarding the CEO of America West/US Airways who turned down his bonus, which amounted to over three quarters of a millions dollars. He stated that he felt it would be wrong to accept it when the employees of the company had been asked to take pay cuts. He also vowed not to accept a bonus until the employees of the company had received dividends and the business was in the black. Oh that other CEOs would take a clue from this man. But since they refuse to do so voluntarily, then they must be made to do so.
The health of a company is only as good as the respect it shows its employees. And when employees are respected, the company prospers, delivering a higher bottom line to its stockholders.
I also urge the SEC to require that companies disclose pay-for-performance data. In order for investors to understand how pay and performance match up, companies need to explain more clearly what level of performance is necessary for a particular level of pay. I urge the SEC to require companies to disclose both the performance criteria and the performance targets they use when setting executive pay.