On January 31, 2008, the Chairman of the House Committee on Oversight and Government Reform, Rep. Henry A. Waxman, sent letters to the compensation committee chairs of each of the Fortune 250 companies asking for detailed information on how these companies utilize executive compensation consultants.
The letter follows a committee hearing on executive pay and compensation that was held in December 2007, at which testimony was provided by corporate governance experts and representatives of compensation consulting firms. It also follows a report issued in December 2007 by the Committee’s majority staff, in which the staff concluded that (1) compensation consultant conflicts of interests are pervasive; (2) the fees earned by compensation consultants for providing "other services" often far exceed those earned for advising on executive compensation; (3) many Fortune 250 companies do not disclose their compensation consultants’ conflicts of interest; and (4) there appears to be a correlation between the extent of a consultant’s conflict of interest and the level of CEO pay.
The letter asks that Fortune 250 companies provide responses to a number of questions for the period of January 2006 to the present and that companies provide answers to these questions for any parents or subsidiaries. All responses should be submitted to the Committee by February 22.
Kelley Drye has prepared a client advisory which further outlines Chairman Waxman's letter.