US pay policies 'encourage CEOs to act recklessly'

Executive pay structures within US corporations are encouraging chief executive officers (CEOs) to take a reckless approach to planning and strategy.

This is according to Eleanor Bloxham, chief executive officer of the Value Alliance and Corporate Governance Alliance, who told CNN Money that US CEOs are currently acting out of self-interest and taking decisions that bolster their pay rates, rather than helping their companies.

For example, she noted that many bosses are currently engaging in widespread cost-cutting due to the fact this bolsters stock prices, despite the fact that in many cases this could harm an organisation's long-term prospects.

Ms Bloxham said it is therefore the responsibility of the board to align rewards with sustainable performance more effectively, to avoid the risk of widespread economic instability.

She explained: "Boards need to hire CEOs who are motivated by the job rather than the pay and undo outsize compensation programs tied to options and restricted stock."

This comes after a Wall Street Journal report last month suggested that US financial sector salaries for the 2011 fiscal year have fallen to their lowest level since 2008, as companies make efforts to rein in excess pay.