U.S. politicians jump into CEO pay debate

NEW YORK (Reuters) - Presidential candidates from both sides of the aisle are joining union leaders and activist investors attacking lavish U.S. CEO pay, but there is little optimism there will be concrete reform any time soon.

Corporate America's pay practices have been an easy target for angry investors feeling the crunch of the mortgage and credit crises that have triggered write-downs at Wall Street firms, job cuts and stock declines.

They complain that business leaders are enduring little pain themselves, and the message is getting through on the campaign trail.

Among those attracting criticism are ex-Merrill Lynch & Co Inc Chief Executive Officer Stanley O'Neal, who got a $161 million retirement package after he left under pressure last year, and former Citigroup CEO Charles Prince, who received $39.5 million in stock, options, bonus and perks upon departure.

Democratic presidential contenders Barack Obama and Hillary Clinton have spoken out against such hefty CEO pay packages, with Obama the Senate sponsor of a bill that would give public company shareholders an advisory "say-on-pay" vote on top executives' compensation.

Presumptive Republican nominee John McCain recently took his own swipes at the pay of company CEOs at the center of the mortgage market crisis. Sounding a lot like an activist fund manager, the Arizona senator called the compensation of leaders at Bear Stearns Cos Inc and Countrywide Financial Corp

"outrageous" and "unconscionable."

Investor rights advocates say they welcome the spotlight on what they see as out-of-control CEO pay, though few believe that specific new proposals will be put on the table unless the next occupant of the White House puts heavy pressure on companies to be more accountable to stockholders.

The "caterwauling" by politicians is "like summer storms," said Robert Monks, a long-time advocate of good corporate governance. "They come and they go. They flash and they're bright, but they don't last and they don't accomplish anything."

Politicians have been forced to address CEO pay amid rising wealth disparities. U.S. corporate chiefs earn much more on average than their counterparts abroad, and their pay is about 600 times that of the average U.S. worker, according to academic studies.

Last year, President George W. Bush went to Wall Street to complain about executive pay packages. Since then, investor advocates say, little has changed.

McCain, for his part, didn't recommend any specifics on how to rein in executive pay, with one of his top advisers later saying the candidate's remarks were an effort "to shine a light" on the pay issue.

It's no surprise that CEO pay is attracting attention this election year, said Timothy Smith, senior vice president at Walden Asset Management, which focuses on socially responsible investments. Average Americans, he said, are frustrated over multimillion-dollar CEO payouts and perks as they grapple with the rough housing and jobs market and soaring gasoline prices.

"You don't have to be a prairie populist to say this expanding income gap in the American scene is unjust and troubling, and that the executives that therefore participate in promoting and making this happen deserve to be challenged," he said.

DO BOARDS NEED GOVERNMENT INTERVENTION?

Companies argue that they must reward CEOs generously to retain top talent, and that their pay is based on many factors such as a company's profit levels. But many outside the executive suite have trouble seeing that point of view.

The House of Representatives last year passed a measure to allow stockholders to cast nonbinding annual votes on the pay of top executives, but the companion Senate bill has made little headway.

Aides to Obama, the Senate sponsor, said that if the bill did not become law this year the Illinois senator would champion it if elected president. U.S. Sen. Clinton, who represents New York, also supports the Senate bill.

But there is debate, even among investor rights proponents, over whether there is a legislative solution to fat CEO pay awards. While they typically support the "say-on-pay" bill, they say corporations themselves should create their own ways to give investors a voice on pay matters rather than be forced by Congress to adopt a broad advisory voting system.

Meanwhile, companies are now in the process of releasing CEO pay details in spring proxy filings, and they are increasingly concerned about how the pay data are perceived, said Jannice Koors, a managing director at pay consultant Pearl Meyer & Partners.

In some cases, a CEO's pay may have risen in 2007 -- even if the company's stock price was hit that year by the mortgage problems -- because of bonuses awarded based on performance over a multiyear period when company results were better. That doesn't mean shareholders will be happy when they see the pay data, though.

"There is kind of an unavoidable potential mismatch in the timing of things, and there is no amount of regulation that is going to fix that," Koors said.

With the economy in turmoil, CEO pay should get more attention as workers become more irate over pay inequity in U.S. society, said Monks. It's the next president's job to do something about it, he said.

"I keep saying to myself, when is the rage going to express itself politically?" he said. "By and large we have been in a situation where every societal interest has basically been subordinated to a CEO's pay."

(Reporting by Martha Graybow, editing by Gerald E. McCormick)