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Before AIG bonuses debacle, a shift toward lower executive pay

Many moves were already under way to change the compensation culture.

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Insurance company AIG is under fire for the hefty bonuses it handed out, but the trend in the corporate suite appears to be a tightening of belts.

As a result of the recession, some CEOs are already working for $1 a year, and entire floors of executives are taking 10 percent pay cuts. A few are selling their luxury items – sports cars for example – to plow the profits back into the business. Boards of directors, which used to rubber-stamp CEO rewards, are beginning to take a closer look as they try to avoid antagonizing the public.

“The times have changed,” says Brian Tobin, a Chicago-based executive compensation expert at Hay Group, a consulting firm. “The last few weeks have significantly increased the public focus on executive pay.”

President Obama has also chimed in, criticizing the AIG bonuses and, since the start of his presidency, demanding more accountability from corporative executives.

“People are rightly outraged about these particular bonuses,” Mr. Obama said Wednesday. “But just as outrageous is the culture that these bonuses are a symptom of, [which] has existed for far too long.”

Changes afoot

Already, systemic changes are being implemented or considered. Among them:

•Both the Troubled Asset Relief Program (TARP) and the economic stimulus package include attempts to enact compensation limits for companies that need a government bailout.


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