A July 30 article ("3M is one popular peer for CEO pay") gave insight as to how executive salaries are set. Having worked in the human-resources business for 25 years, much of that as a VP of a large corporation, I saw the process up close.
Large companies usually use a "compensation consultant" from a large benefits firm to do their search. They then look at comparable companies. When they bring back their recommendations to the compensation committee of the board of directors, the directors are most likely to accept this advice -- it's what they paid a good fee for.
Let us not forget that many, if not most, of the board members are fellow top executives. They are unlikely to say "we think we can get a top executive for much less than that level of compensation." Their own salaries are determined by the same method. Thus we have a circle that will be hard to break.
JOHN OLDENDORF, LAKE ELMO
