Bush demands greater openness on CEO pay

2007

In a hard-hitting speech widely being seen as a warning shot across the bows of corporate America, President George Bush has called for greater transparency in how the pay and compensation of top executives is decided.

In his "state of the economy" speech, Bush warned that some workers were being left behind by America's booming economy and that the gulf between rich and the poor was growing, with potentially serious social consequences.

"The fact is that income inequality is real. It has been rising for more than 25 years. The earnings gap is now twice as wide as it was in 1980," he said.

While better more education and training had an important role to play in lifting the salaries of all Americans, the enormous salaries and other perks of top chief executives could create anger and uncertainty that affected the country's investors, he conceded.

While it was not up to the government to intervene directly, there was a need for greater transparency between performance and reward, he argued.

"Government should not decide the compensation for America's corporate executives. But the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders," he said.

"America's corporate boardrooms must step up to their responsibilities. You need to pay attention to the executive compensation packages that you approve. You need to show the world that America's businesses are a model of transparency and good corporate governance," he added.

But Bush may be pushing at an already open, or at the very least opening, door.

Last month the Securities and Exchange Commission agreed new rules on the disclosure of the compensation, salaries and bonuses for senior executives of listed companies.

A scorecard disclosure system is being put into place to ensure listed companies whose fiscal year ends after December 15 outline executives' annual salary, any bonuses, stock awards or options, any other incentive-based compensation, changes in the value of the pension and all other compensation in their annual reports.

The move has been hailed by some financial observers as the biggest overhaul of executive pay disclosure since 1992.