Tags: mutual | funds | board | pay

Mutual Funds Turning Up the Heat on Corporate Board Pay

Thursday, 23 May 2013 08:03 AM

By Dan Weil

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Mutual fund firms are beginning to raise a stink about the pay practices for corporate directors, following on the trail of activist investors.

In the past, mutual fund firms generally voted with management, but the times they are a changing, The Wall Street Journal reports.

Pay systems as currently structured don't make directors take enough stake in whether a company does well, John Wakeman, a portfolio manager at mutual fund goliath T. Rowe Price Group, tells The Journal.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

Boards need to show more creativity in connecting pay with performance, he says. "If bad people are going to be on these boards, we've got to stop it. We owe it to our fund holders."

Outside directors earned a median salary of $244,637 last year at the 200 largest public U.S. companies by revenue, up from $231,021 in 2011, according to the National Association of Corporate Directors. Some of that pay consists of restricted stock.

At those pay rates, you can see why mutual fund firms are concerned.

"When you've gone to restricted-stock world, basically directors get paid more or less for showing up," Wakeman said.

Joe Cahill, an editor for Crain's Chicago Business, offered a scathing indictment of directors and their hefty paychecks.

"Some say it's unfair to subject directors to such onerous obligations. I say anyone unwilling to accept performance scrutiny and accountability on behalf of shareholders shouldn't be a director," he writes.

Editor's Note:
This Wasn’t an Accident — Experts Testify on Financial Meltdown

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