Yesterday, the White House announced new plans for letting investors have a say in executive compensation. With this proposal, shareholders of all public companies will be able to vote on the pay levels of the companies’ highest paid senior management. This sounds like a better plan than allowing the government to set absolute compensation limits, but while the shareholders would have a vote, they would have no power to enforce the results of the vote. The companies can decide to ignore the shareholders’ wishes, effectively saying, “Thanks for the suggestion; we will get back to you on that. Don’t call us, we’ll call you.”
Additionally, the executive branch named Kenneth Feinberg as “pay czar.” Feinberg will oversee major expenses for companies that received money from the Troubled Asset Relief Program (TARP).
Will the new legislation giving shareholders votes on executive compensation, if passed by Congress, have any effect?
Published or updated June 11, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 6 comments… read them below or add one }
First of all… I really like the new layout and design. I usually read your blog through Google Reader, so this was a nice surprise.
I think this legislation will have minimal effect. Most shareholders don’t vote, nor will they follow up and read through the Proxy to find out what was decided upon.
I disagree with this “Pay Czar” crap. Places like BoA, Citi, AIG, maybe they need only performance based incentives and a small bonus, but limiting pay and expenses for TARP funded companies? No way, the Gov’t forced TARP money down many banks throats. Look at what’s coming out with BoA and Merrill. The Gov’t strongarmed the merger, which caused BoA to need even more TARP funds.
This stuff is all simply B.S. the shareholders always had a say…by choosing who is voted to the
board. If the board approved an $18million contract for the new COO – you could have ousted the board, but most shareholders throw out those proxy notifications when they come in the mail (I know I do lol)
And if the shareholders reject the recommended board of director candidates, then who can they vote for? It’s all part of a gentleman’s and gentlewomen’s club of elite people who are all on each others’ boards of directors and they all tend to dole out huge salaries to executives because they’re all in on it together.
Still, this legislation won’t do anything if the shareholders can’t enforce pay limits.
As for people who say that limiting pay limits the quality of the executives, I think we’ve seen with the financial crisis that exorbitant salaries encourage hiring of the greedy and not necessarily the competent.
Does anyone realize how many of these “czars” we’ve accumulated? Drug czar, education czar, pay czar. I’ve heard that we have about 20 different “czars” to oversee something or other. When does it end?
Land of the
freeCZARSPretty soon we’ll be circa 1800′s Russia!
/facepalm
When will the government stop thinking it can fix everything? I can’t wait for the day everyone wakes up.