Here's a move by Democrats that I can support: requiring shareholder approval of executive pay packages. I would definitely be against government regulation of executive pay, but I do believe that many boards of directors don't exercise proper oversight of their executives. Plus, the relationships between boards and executives are often incestuous, with a board member A setting the pay of executive B at one company while B sits on the board of another company where A happens to be an executive. The problem to me isn't income inequality per se, but the fact that shareholders don't have a way to ensure that they get their money's worth.
One person who wants to do something about it is the new chairman of the House Financial Services Committee, Barney Frank of Massachusetts. Democrat Frank is confident that the House this year will approve his legislation to give shareholders the chance to vote on compensation and golden-parachute packages for top executives at publicly traded companies. ...
The most specious argument is that legislation is unnecessary because the CEOs add so much value to the company. Shareholders that are reaping big returns surely won't complain about pay packages.
``The same green eyeshade should be applied here as any other asset allocation,'' Minow says. ``You don't hear complaints about Bill Gates.''
There are other shareholders that would and should complain about indefensible compensation packages, says Warren Buffett, America's foremost investment guru. ``Too often, executive pay in the U.S. is ridiculously out of line with performance,'' he wrote in his annual report.
Golden parachutes for non-performing CEOs especially rankle the Sage of Omaha: ``Getting fired can produce a particularly bountiful payday for a CEO,'' he wrote. ``Indeed, he can earn more in that single day while cleaning out his desk than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success: Today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure.''
Examples abound, starting with Home Depot's Nardelli. Pfizer Inc.'s Henry McKinnell, dumped by his board last year, walked away with a $180 million package. Hewlett-Packard Co. shareholders got off comparatively easy; Carly Fiorina's severance package -- after she was ousted -- was valued at about $42 million.
The role of government in a capitalist economy is to guarantee a flow of truthful information and to protect contracts and private property rights. Shareholders own corporations, and we should have a say in how much our executive employees get paid.