An increasing number of corporate board directors in the U.S. believe that CEO pay is too high and the overwhelming majority want to see closer links between CEO and performance.
Signs that a significant change is underway in America's boardrooms have emerged from the 10th Annual Corporate Board Effectiveness Study carried out by the Center for Effective Organizations at the University of Southern California's Marshall School of Business and executive search firm Heidrick & Struggles.
With responses from 768 directors at approximately 660 of the 2,000 largest publicly-traded companies in the U.S, the survey is a significant weathervane of the attitudes of America's board directors.
The study revealed that almost four out of 10 of the directors surveyed believe that CEO pay is "too high in most cases," a significant increase over previous years.
As a result, the overwhelming majority (81 per cent) favour strengthening the link between CEO pay and performance.
Most, however, remain pessimistic that proposed governance reforms will have any significant effect on controlling CEO pay.
One exception is mandatory shareholder approval of compensation programs, something that half of directors believe would start to have an impact on lowering CEO compensation packages. Outside directors are more likely to feel this than inside directors.
But despite the new SEC disclosure regulations and the fact that they expect to be spending more time addressing CEO compensation issues, two-thirds of directors expect to see continued increases in CEO cash compensation.
Unsurprisingly, meanwhile, the majority of directors (84 per cent) also complained that boards spend more time on monitoring activities and less on shaping strategy - an area in which four out of 10 believe there is room for improvement.
Another notable trend to emerge from the study is evidence of a significant shift away from the all-powerful CEO, with eight out of 10 directors reporting that CEOs have "less control over their boards" than before.
One reason for this is that three-quarters of boards now have an independent director who serves as lead or presiding director , a rapid from half 2003 and just a third in 2001.
Another sign of the impact of corporate governance reforms is the fact that almost six out of 10 directors say they are now much more hesitant to serve on other boards.
Inside directors are even more hesitant than outside directors to sit on boards, while half of corporations now have limits on the number of boards on which their CEO can serve, up from just a quarter in 2001.
Four out of 10 also have limits on the number of boards on which their outside directors can serve, a factor that is having a big impact on the ongoing difficulties many have in recruiting qualified directors.
"There continues to be dramatic change in boardroom dynamics. Today's directors face public criticism over executive compensation and must comply with strict governance reforms making their work more challenging and possibly less fulfilling," said Heidrick & Struggles' Theodore L. Dysart.
"To succeed in business, companies will need to do a better job of recruiting and retaining top talent in the boardroom, as well as in the executive suite."