Capital Group leaders look to rein in inflated CEO pay

Mon May 2, 2016 7:09am EDT
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By Ross Kerber

BOSTON (Reuters) - The usually close-mouthed Capital Group is speaking up on executive pay - throwing more brickbats than bouquets.

In a recent interview, leaders of the $1.4 trillion Los Angeles-based investment manager said they worry about the magnitude of pay for chief executives and question whether corporate boards are using the right benchmarks to determine compensation.

"There has been this continued escalation where everybody wants to be in the upper quartile," Alan Berro, senior portfolio manager at Capital Group, told Reuters.

"Once one guy raises it, they all want those raises, and we are willing to say no," he said.

Berro's comments are important because Capital Group, which oversees the big American Funds mutual fund family, is one of the largest holders of U.S. stocks and is emerging as one of the toughest critics of corporate compensation.

A measure is its voting record on what are known as "say-on-pay" resolutions - non-binding measures which let shareholders vote on whether to approve compensation for top executives.

Last year, big mutual fund providers including BlackRock Inc and Vanguard Group voted in support of say-on-pay resolutions of S&P 500 companies at least 96 percent of the time, according to research firm Proxy Insight. Capital Group, however, was less generous in its support, with its funds supporting the pay 86 percent of the time, one of the lowest rates among big U.S. fund managers.

Executive pay, which has been a source of controversy for some time, has drawn more scrutiny amid stagnant U.S. wages for the typical worker. Median pay among S&P 500 CEOs rose to $11.3 million in 2014 from $9.4 million in 2010, according to pay consultant Farient Advisors.   Continued...

Alan Berro, Capital Group portfolio manager, is seen in an undated picture courtesy of Capital Group. Capital Group/Handout via REUTERS