CEO pay debate spurs new industry group

By Martha Graybow

NEW YORK (Reuters) - With business leaders facing rising scrutiny from shareholders and lawmakers about their compensation, a new organization wants to tell corporate America's side of the executive pay story.

Leaders of the Center on Executive Compensation, an industry-backed group based in Washington, say they want to offer a reasoned view about how to create good pay practices.

The center says its mission is not to blindly defend CEO payouts that have angered investors, but to strengthen the links between pay and performance industrywide while ensuring companies remain competitive.

The media has "rightly" put the spotlight on instances of excessive CEO pay, "but our concern is that paints a picture of corporate America in total," said Richard Floersch, the center's chairman and chief human resources officer at McDonald's Corp (MCD.N).

"For the vast majority of companies, they are dedicated to a very strong executive compensation program with very strong principles around pay for performance," he said. "Unfortunately, that story doesn't come out when you do have some of these outlier situations."

Activist investors have lashed out over executive payouts they consider too lavish, while members of Congress have publicly scolded some corporate chiefs for receiving outsized pay packages at a time when their companies have been hard hit by the U.S. mortgage crisis.

GRILLED

In March, two ex-Wall Street CEOs, Merrill Lynch & Co Inc's MER.N Stanley O'Neal and Citigroup's (C.N) Charles Prince, as well as Countrywide Financial Corp CFC.N CEO Angelo Mozilo, got grilled about their pay by a U.S. congressional panel.

O'Neal, who stepped down amid big mortgage-related losses at Merrill, was not awarded any severance or exit pay but left with $161.5 million in previously earned awards. Prince also departed in the wake of mortgage losses at Citigroup, leaving with $39.5 million in stock, options, bonus and perks.

Mozilo, long criticized for his pay, realized $121.5 million from exercising stock options and was awarded $22.1 million of compensation in 2007, a year when the mortgage lender was hurt badly by the U.S. housing slump.

CEOs themselves play no direct role at the new center, an offshoot of the HR Policy Association, which represents human resources officers at big U.S. companies.

The center has a 16-member advisory board made up of chief HR officials at companies such as American Airlines (AMR.N), International Business Machines (IBM.N) and Lockheed Martin Corp (LMT.N).

Shareholder rights activists say they do not have high hopes that the executive compensation center will advocate for investors.

"This is part of the effort of the business community to protect the status quo from angry shareholders and a concerned Congress," said Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County and Municipal Employees (AFSCME), a frequent critic of executive pay plans.

"It just shows that the business community is mobilizing, rather than reforming pay," he said.