Posted: June 9, 2022
It’s no secret that the average executive makes more money than the average worker. This has been the arrangement since the very first business was created. The executive has more responsibility and, therefore, receives a higher paycheck. If the employee works hard enough then one day they’ll be able to join the executive suite. This arrangement has worked well for years. However, over the past few decades, some might say that the scales have been tipped out of balance. These days, top executives are paid more like professional sports stars. On average, top CEOs bring home around $20 million each year. Meanwhile, the national minimum wage still sits at just $7.25 an hour. Major shareholders have taken notice of this perceived inequality and are starting to raise their voices. Let’s take a look at the continued shareholder criticism of executive compensation. What’s the Big Deal? It’s incredibly rare for shareholders to vote against an Two Examples of Shareholder Criticism NatWest, formerly the Royal Bank of Scotland, recently proposed a new executive pay package. In this package, CEO Alison Rose would earn as much as £5.2m a year. This is up from £3.6m in 2021. The package would also increase her potential bonus payouts by 25%. The advisory firm Glass Lewis, encouraged shareholders to vote against this package. Glass Lewis stated “We are concerned by the increase in overall incentive opportunity and the introduction of an RSP (restricted share plan) absent of a compelling strategic rationale for this type of award structure.” Essentially, NatWest introduced a compensation plan that would allow its CEO to earn significantly more money. But, it failed to actually state why this type of payment structure was being used. Basically, they didn’t state how it would actually help the business improve. Instead, it just felt like NatWest just felt like handing out more executive bonuses. Another industry that has recently come under fire from shareholders is the insurance industry. In 2020 and 2021 during the height of the COVID pandemic, people were forced to quarantine at home for months at a time. Since practically nowhere was open, there was no reason to drive anywhere. Due to this, you’d think that insurance companies would offer some type of rebate for auto insurance packages. That wasn’t the case though. A recent study by the Consumer Federation of America shows that, during America’s toughest year in recent memory, auto insurance companies were actually raising premiums. They took advantage of a lower-risk environment to pad profits. At the same time, they paid out hefty bonuses to top executives. In total, auto insurance executives collectively earned just under $200 million in 2020 and 2021. This study is fairly new and shareholders are still speaking out. To learn more about maximizing executive compensation, visit our Contact Page, or contact us directly by email at firstname.lastname@example.org or by phone at 415-618-6060.