March 24, 2009

Say on Pay

My wife, who I consider a good lawyer and I totally disagree on the way the public outcry has been unleashed against some executives at AIG and other organizations. She holds to the belief that this “bonus money” is her tax dollars and these people don’t deserve to be paid with her money. I get the frustration, but my point is why does this “say on pay” deserve to be different than an individual shareholder’s opportunity to control the way corporations incentivize and pay their executives? In my view it doesn’t.

I have never been in favor of say on pay by shareholders or God forbid the Government. Shareholders have the right to make their feelings heard but most are not qualified to make decisions for the organization. Shareholder say on pay should remain a vote with their feet or their proxy statements. In my last installment I said that boards have to step up, dig in and bring some collective sensibility to this process. I think it is also time for shareholders to step up, dig in and remove some board members. Some of these directors also need to be thanked for their meritorious service and sent to permanent retirement not just shuffled to the next board.

I believe that the world has to hold Board of Directors to an increased level of accountability. Boards (not shareholders) have the obligation to understand what it takes to hire and incentivize key executives. Boards (not shareholders) are empowered to set reasonable and appropriate incentive targets – regardless of the number of trailing zeros. We have a governance system that has worked for more than 100 years, but greed and lack of accountability has diluted its value. And what is this silly tax idea??? Simply stated, boards must return to accountability for executive compensation so that is ensures that all the organization’s stakeholders get rewarded.

So what do you think government’s or a shareholder's role should be on “say on pay”?


2 Responses to "Say on Pay"

Raquel said... March 27, 2009 at 2:24 PM

Like my dad used to tell me, "Once you give the money to someone, the right to determine what will be done with that money is forfeited.” It is like giving 5 dollars to a homeless person and expect them to use it for food. They will buy whatever they want with that money! If you want them to eat, bring them the food, not cash!

In my opinion, Government should have never bailed out business in trouble. I find it funny that everyone is complaining about how AIG is spending this money, when government's decisions in regards to spending are extremely irresponsible. What if these bonuses were part of a contract? Employees are to get the shaft because government says so?

I just really wish government would stay out of private business. The less government, the better, but this is not what we got with this new administration, so hold on to your hats and pockets...

Anonymous said... July 22, 2009 at 8:46 AM

If the government is to "stay out" of private business.....THEN private business men should STAY OUT of politics. The business people are known to contribute to campains of those politicians they feel can provide the most help in the future.

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David Childers
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