Council of Institutional Investors The Voice of Corporate Governance

Executive compensation is the most critical and visible aspect of a company’s governance. Directors’ decisions about CEO pay speak volumes about the board’s accountability to shareowners. Too often, the story they tell is a dismaying one: Overly generous pay packages for under-performing CEOs.

While executive compensation has been a top governance concern of Council members for years, the financial crisis revealed abuses that make getting pay right all the more urgent. Poorly structured pay packages encouraged the get-rich-quick mentality and overly risky behavior that helped bring the capital markets to their knees.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July 2010, mandated important executive pay reforms on topics including advisory shareowner votes on executive compensation ("say on pay") and golden parachutes, pay vs. performance disclosure, compensation committee and adviser independence, clawbacks and hedging.

These measures were generally aligned with the Council’s long-held position that executive compensation programs should be transparent, create value for the long-term, advance the company’s strategic goals and tied tightly to corporate performance. To view the Council's corporate governance policies on executive compensation in full, please visit the Council Policies page. Council best practices for executive compensation are Section 5 of the Corporate Governance Policies.