DATE: May 29, 2008

CONTACT: Daniel E. Wueste, (864) 656-6147 or 650-6545
ernest@clemson.edu

WRITER: Teresa C. Hopkins, (864) 656-1222
hopkin1@clemson.edu


Results of ethics survey of CEOs

CLEMSON, S.C. — The results of the ethics survey by the Robert J. Rutland Institute for Ethics at Clemson University indicate CEOs disagree to strongly disagree with the statement that CEO compensation in most large public companies is aligned with performance. Two-thirds of the CEOs agree there is a generally accepted ethical standard that most business people agree and act upon.

The survey reveals several things about how respondents see the issue of CEO compensation.

For example, exorbitant executive compensation is among the top five ethical issues (33.8 percent) when CEOs are thinking about the general business community, but it is last in a list of 22 issues when they are thinking about their own industry (2.6 percent).

Of the respondents, 62.9 percent agree or strongly agree that CEO compensation in most large public companies is excessive, and 70.5 percent agree or strongly disagree with the statement that compensation in most large public companies is properly aligned with corporate performance.

Their responses were different depending on the size of their organization and whether it is public or private.

  • Those in private organizations are more likely to agree that CEO compensation in most large public companies is excessive.
  • CEOs in privately held organizations are more likely to disagree with the statement that CEO compensation in most large public companies is properly aligned with corporate performance.
  • CEOs of smaller companies are more likely to agree that CEO compensation in most large public companies is excessive.

There were differences in the responses to other questions as well:

  • CEOs in privately held organizations are more likely to agree that "my standard of business ethics has improved over the course of my career."
  • CEOs in small- and medium-sized organizations (by revenues and by number of employees) are more likely to agree with that statement.

CEOs also were asked about the criminal convictions of Kenneth Lay, Jeffrey Skilling, Bernard Ebbers and other corporate leaders. They were asked if they agree with these statements.

The convictions:

  • show that the system works (65.6 percent);
  • make corporate leaders more attentive to ethics (88 percent);
  • further erode public trust and confidence in business leaders (66 percent);
  • help restore public trust and confidence in the financial markets (44.5 percent);
  • reinforce a negative and unfair stereotype of CEOs (65.1); and
  • encourage even more legal scrutiny and regulation of business (88.6).

There are no statistically significant differences in those responses by organization size or whether they are public or private. However, there are differences by industry:

  • 76.8 percent of manufacturing CEOs agreed that the convictions “show that the system works”;
  • 82.1 percent of health-care and non-profit CEOs agreed that the convictions “further erode public trust and confidence in business leaders”;
  • 76.9 percent of banking, finance and insurance CEOs agreed that they “make corporate leaders more attentive to ethics”;
  • 34.5 percent of health-care and non-profit CEOs agreed that they “help restore public trust and confidence in the financial markets”;
  • 76.5 percent of information-technology CEOs agreed that they “reinforce a negative and unfair stereotype of CEOs”; and
  • 72.7 percent of professional- and technical-service CEOs agreed that they “encourage even more legal scrutiny and regulation of business.”

Of the CEOs who indicated that recent changes in regulations regarding ethics and governance have affected how their organizations manage ethics and compliance, 38.3 percent have or are in the process of creating new ethics compliance committees. This is the case with a larger number of public companies (45.7 percent) than private companies (33.9 percent).

Equal numbers (50 percent) have or have not increased their budgets for ethics and compliance management; the number reporting that they have increased this budget line is somewhat larger among CEOs of public companies (68.6 percent) than CEOs of private companies (40 percent ).

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