Dubbed the "say on pay" legislation, the bill would provide corporate shareholders more of a voice in setting executive compensation packages. Senator Clinton has apparently jumped on the bandwagon as well, citing concerns over the "outrageous" pay some CEO's are receiving.
The bill would require corporate boards to submit the compensation packages to shareholders for an annual non-binding vote. The purpose is to force boards to disclose the rationale behind the offered CEO compensation package. Senator Obama is quoted as saying "... It's about changing a system where bad behavior is rewarded so that we can hold CEO's accountable..."
There's that "change" mantra again.
Pardon me, but who the devil put Senator Obama, or for that matter, the US Congress, in charge of holding corporate CEO's accountable? Isn't that the role of the Board of Directors, and by equal measure, the company shareholders?
Obama and Clinton have cited Cayne and Schwarts of Bear and Mozilo of Countrywide as prime examples of corporate CEO's who were overcompensated by their respective boards. In hindsight I agree they were overpaid based solely on their performance but the compensation they, and others like them, were offered was commensurate with their abilities. Thus is the way of life in corporate America. Education, background and abilities with perhaps a dash or two of cronyism, all come to play when trying to recruit and/or retain top tier talent.
The folks who have the power to rein in 'run away' CEO compensation packages are the folks who have always had the power to rein in 'run away' corporate CEO packages. They are the shareholders. Investors, however, are generally blinded by stock performance and rarely exercise the power they have because of the returns they anticipate receiving.
When, in the case of Mozilo or Cayne, their performance is damaging to investors, let the investors resolve the issue through the severance of the CEO's relationship with the company. Let the investors of such companies bring pressure to bear on the boards to craft employment contracts that reflect the will of the majority. Poor performance negates the company's obligation to pay highly coveted bonuses or where gross negligence is concerned, the board has the ability to terminate any 'bloated' severance package benefits.
Be warned, however, careful consideration is required when crafting CEO compensation packages. Corporations are for profit entities; attracting the best and the brightest requires the offering of commensurate compensation. Let's face it; it takes more than a modicum of intelligence and ability to run a multi-billion dollar corporation.
It is time for a change; it's time to tell Uncle Sam to sit down, shut up and let the free markets work. More bureaucratic 'help' from the government is just what we (don't) need.
Jesse & Kathy Clifton, better known as 'The Spouses' are full time Realtors serving Fairbanks Alaska buyers and sellers. They specialize in residential real estate; new and existing construction as well as undeveloped land in Fairbanks, North Pole, Ft. Wainwright, Eielson Air Force Base and Interior Alaska. Visit their website to review the fee market reports designed to keep you updated on the local Fairbanks Alaska real estate market. Have specific questions? Feel free to contact them anytime. They would love to hear from you.
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