Why increased executive pay input for shareholders makes sense

Posted Oct 16th 2007 8:24PM by Zac Bissonnette
Filed under: Management, Insiders, Newspapers, Scandals

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.

Tags: compensation, executive compensation, ExecutiveCompensation, pay

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Reader Comments (Page 1 of 1)

10-16-2007 @ 11:21PM

joe said...

it is the same ol GOOD OL BOYS who have the wealth & want to keep all the common folk down that WANT to keep the price HIGH on a stock same as they want the OUTRAGOUS salaries that THEY & there other CEO'S etc get.... that is how the rich have becoming more rich & the poor more poor... it is absolutely criminal !!!! NOT to split a stock when it reaches $60-$85... yep, keep the average joe down but let the rich get richer ...

10-17-2007 @ 12:18AM

mary said...

Always wondered about reasons for te large option grants that made up so much of their pay. USA Today had an article trying about Senator Levin trying again to stop the companies from deducting the stock options as an expense. They said it was the fourth time since 1997. Could only find a link to a 9-28-07 article in Reuters http://www.usatoday.com/money/companies/2007-09-28-stock-options_n.htm I do not think corporations can deduct dividends as an expense.