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Why increased executive pay input for shareholders makes sense

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As investors, corporate governance experts (What does that even mean?) and the SEC debate proposals that would give shareholders greater say over executive pay, there's compelling evidence that the time is right. First, chief executives themselves think they are heinously overpaid. If you need more evidence that CEO pay has gotten out of control, I'm not really sure what to tell you.

Anti good-governance zealots are decrying proposals to give shareholders greater say meddlesome, arguing that it could ruin companies' ability to attract good executives. Happily, The Financial Times sees through this nonsense:

Even if chief executives' pay is entirely justified by the value they add, however, it still makes sense to give investors more influence over it. If the present stratospheric levels are needed to attract good CEOs then shareholders will pay up, but if high CEO pay is simply a function of executives' insider power then giving investors control will produce restraint. Either way, plans now afoot to let investors nominate directors are a good first step. They deserve support.

And that's exactly what this is about. Greater shareholder rights is always a good thing -- letting the people whose money is being sent have a greater say in how it's spent makes sense. It's a shame that we even have to have an argument about this.

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Last updated: November 27, 2009: 11:38 AM

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