On November 18, 2002, The Globe and Mail (p. B4) reported “CEO assails pay disclosure rules.” This referred to a speech by Claude Lamoureux, CEO of Ontario Teachers Pension Plan Board. The board is a major owner of and shareholder in numerous companies, hence vitally interested in questions of executive motivation and compensation. Mr. Lamoureux's concern is with the OSC rules requiring firms to disclose and explain the compensation of their five most highly paid employees. He argues that the effect of these rules is simply to put upward pressure on pay levels, as executives demand raises to meet or exceed that of their peers in other companies.

In this regard, the BCE Compensation Committee states (Exhibit 10.1) that an execuave’’

total compensation is positioned at the median of what is paid by a group of similar companies.

In the changes to the BCE plan for 2004, the committee advises that total compensation will be increased to the 60th percentile of that paid by the comparable companies.

Required

a. Explain the argument in favor of companies disclosing compensation information of their senior executives. Why do you think that Mr. Lamoureux, CEO of a very large and powerful institutional investor, rejects this argument?

b. How do you think the policy of BCE Inc. of fixing its total executive compensation at the 60th percentile of that paid by the comparable companies will affect the level of executive compensation in the telecommunications industry?