What Business Thinks™ 2007—A Healthy 2007?

What Are You Worth?

Executive compensation has become a hot topic in the Minnesota business community. That’s thanks largely, of course, to the investigation of alleged stock-option backdating to inflate returns for executives at Minnetonka-based UnitedHealth Group. (UnitedHealth Group CEO William McGuire was forced out by the company’s board in October over the issue.) But the business world in general has been rocked by criticism—and not just outside the boardrooms—that some CEOs are overcompensated relative to their companies’ financial performance.

The Minnesota business leaders polled in 2006 seem generally sanguine about the issue. Survey participants were asked: “How important is the issue of disclosure of executive compensation in your company?” Nearly half—48 percent—categorized it as “not at all important, while 28 percent rated it “very important” or “important.” In addition, they were asked, “What is your impression of executive compensation in your company?” A significant 70 percent responded that their executive compensation is “adequate,” while only 5 percent described themselves and their colleagues as “highly overpaid,” and 8 percent said they themselves were “overpaid.” It’s not surprising, then, that 88 percent of business leaders responded “no” to this question: “Are executive compensation issues creating morale issues for your company?”

As for the government’s role in policing executive compensation, respondents took a similarly strong stance. They were asked: “How involved should government become in setting limits on executive compensation?” A total of 12 percent gave responses of “very involved” or “involved,” while 66 percent said “not at all involved.”

The message from Minnesota business seems to be, “It’s the exceptions that break the rules. The rest of us are committed to doing business the right way, whether or not anyone on the outside tells us to do so.”