CEO compensation rise challenges corporate communicators

CEO compensation is a tricky issue for Fortune 500 corporate communicators. That is especially true now.

CEO compensation is a tricky issue for Fortune 500 corporate communicators. That is especially true now. When most Americans are still feeling the aftermath of the recession, Wall Street and company bottom lines seem to not only be healthy, but thriving.

A recent Wall Street Journal article found the median value of overall compensation for chief executives at the largest US companies surged by 11% in 2010. The rise followed a year in which pay for the top boss was flat at the 350 major companies surveyed.

“I don't know any corporate comm department that would steer attention toward the topic [of CEO compensation], but the fact that this information is required for a proxy statement means a company can't avoid it,” says Chris Gidez, SVP, global practice leader, risk management/crisis communications at Hill & Knowlton.

Gidez has also worked on the client side, including overseeing the corporate PR department for Chevron Corp., a Fortune 10 company. “I don't think there is anything a company can do to avoid the scrutiny of a CEO compensation disclosure,” he tells PRWeek

So how should corporate PR pros respond to such media scrutiny?

“Companies should not be apologetic – value, like beauty, is in the eye of the beholder – but you do need to be able to offer a rationale as to how the compensation was calculated and show that it is tied to the company's performance,” says Gidez. “For instance, some CEOs' compensation may have doubled versus the prior year, but that prior year may have been disproportionately low due to the lingering effects of the recession.”

That strategy was reflected in the response made to the Journal by Viacom, whose CEO Phillippe P. Dauman topped the salary list with compensation last year valued at $84.3 million, more than double the year prior. The article quoted a Viacom spokesperson who said, “Viacom shares appreciated 33% during calendar year 2010 as compared with the 13% increase in the S&P 500.”

Jason Schechter, chair of US corporate practice at Burson-Marsteller, says companies can also tie compensation to performance by underscoring that the CEO's compensation is enhanced through items like bonuses, stock options, and other incentives.

“You can look at specific items of corporate performance that are taken into account when you make compensation decisions, such as stock options that have vesting dates,” says Schechter. “The company can communicate that, ‘This is a tool for us to keep a good executive employed with this company for an extended period of time.'”

In contrast, Oracle, whose billionaire founder Larry Ellison took the second spot with compensation valued at $68.6 million, declined to comment for the Journal article.

PRWeek reached out to corporate communicators for several companies on the list. They declined comment or did not return calls.

“Companies have to realize they have to disclose the compensation anyway, that they have a heightened regulatory environment, so they would be wise to put it into context. If you say nothing, you leave others to make their own proclamations,” says Schechter. “I also think investors need to understand a company's compensation objectives, as well as other stakeholders.”

Despite efforts to manage the story about CEO compensation, both Gidez and Schechter agree the subject is always going to come under scrutiny, even in good economic times.

However, as Gidez points out, “shareholder dissatisfaction is ultimately more powerful than media coverage in shaping a company's compensation committee.”

Still, companies should be prepared for media requests they'll inevitably get about CEO compensation. “They happen this same time each year,” says Gidez. “Media stories on CEO salary disclosure are about as predictable as the sun rising in the east.” 

Would you like to post a comment?

Please Sign in or register.

News by email...