Slash 'fat-cat' pay, urges Fed chief

The president of the Federal Reserve Bank of New York used a September 11 commemoration speech to call on corporations to cut the pay of executives.

“Beginning with the strongest companies, CEOs and their boards should simply reach the conclusion that executive pay is excessive,” William McDonough said, in the speech at Trinity Church in lower Manhattan.

“Sadly, all too many members of the inner circle of the business elite participated in the over-expansion of executive compensation,” he said, which turned out to be “terribly bad social policy and perhaps even bad morals”.

McDonough attributed the rise in executive pay to the perception that high levels of compensation prompted executives to find ways of increasing shareholder value.

“It is reasonably clear now that this theory has left a large number of poorer stockholders, especially including employee stockholders, not only unconvinced, but understandably disillusioned and angry.”

McDonough cited a recent study showing that the average chief executive of a publicly traded company made more than 400 times the pay of a production worker, up from 42 times 20 years ago.

He called on companies to adjust pay to “levels truly related to the benefit of shareholders and other stakeholders such as workers and the community”.

He added, however, that it was not up to the government to legislate on pay, but for companies to solve the problem voluntarily.