Dell Inc. (NASDAQ: DELL) will be making corporate governance changes soon as a result of a lawsuit settlement.

Dell did not admit any wrongdoing (naturally) after a recent lawsuit accused certain Dell directors and employees of engaging in insider trading practices, as well as making false statements about the state of the company's business.

When The Blackstone Group (NYSE: BX) went public, many observers -- myself included -- were concerned by the total lack of corporate governance checks and balances.

But at the time, the private equity industry was so hot that Blackstone could do no wrong, and no one cared enough to complain. But now that KKR is mulling a plan to list on the New York Stock Exchange, things could be different. The wheels have come off the industry, at least for now, and the arrogant attitude of "We'll tell you what we feel like telling you and you'll like it" may not play so well.

The largest pension fund in the country, the California Public Employees' Retirement System (Calpers), wants Ken Lewis and every single one of Bank of America's (NYSE: BAC) 17 other directors sent packing for not disclosing mounting losses at Merrill Lynch or the company's secret meeting with the Treasury Department looking for money to complete the acquisition.

Calpers joins the Service Employees International Union, CtW Investment Group, and a number of other influential shareholders and proxy advisors in voting for Ken Lewis to be kicked off the company's board of directors.

With a wave of shareholder meetings about to hit the United States, directors could be in for the first real test they've faced in a long time.

With shareholders looking at portfolio statements showing losses of 30%, 40%, 50% and more, directors are expected to face a tougher time retaining their seats. And a new trend of brokerages changing the way they vote customers' shares could make changes even more likely.

In The New York Times, Cornell economics professor Robert H. Frank makes the case that executive compensation isn't as big of a problem as so many are convinced it is.

Frank writes that "In the past, a C.E.O. could often stay in the job for many years despite lackluster performance. Today, a C.E.O. who fails to deliver is often dismissed after a year or two."

I'm not sure what planet Mr. Frank is on. It might be true that executives don't last as long as they used to on average, but the financial markets are full of underperforming companies run by ineffective CEOs. When changes are made, it's often as a result of prodding by activist shareholders rather than by proactive decisiveness on the part of the board of directors. Then there's this ridiculous point:

If the market for executive talent is competitive, critics ask, why are C.E.O.'s in an industry paid about the same, regardless of performance? That's because no one knows with certainty how a particular executive will perform.

Exactly. But the point of pay for performance is to align executive compensation with performance. If they do well they make a lot of money, and if they don't then they don't. Mr. Frank seems to concede here that pay for performance is essentially a myth.

That said, I basically agree with Frank's point that imposing congressional limits on executive pay is a bad idea. Limiting tax deductibility would simply lower shareholder returns.

But maybe there's an alternative. If Congress imposed a limit on the tax deductibility of executive pay (one with teeth, not one that provides a giant loophole for anything that is tied to "performance") and then used the extra revenue produced to buy down capital gains tax rates, the result would be to provide an incentive for companies to limit executive pay while also giving a portion of the money back to shareholders when they pay excessively.