Comments on: Like master, like man

By: Bernard Yomtov

Bernard Yomtov — Sun, 16 Apr 2006 15:05:50 +0000

I agree that loosening restrictions on takeovers would help, but there are some more radical changes that I would like to see adopted. Probably my favorite is to make it easy for someone to challenge for a board seat. Why shouldn’t the shareholders get to choose their representatives instead of having them effectively appointed by management, who the board is supposed to supervise?

By: DBL

DBL — Wed, 12 Apr 2006 16:27:06 +0000

I’m surprised that a sophisticated lawyer like you can’t figure out the solution to the problem of excessive executive compensation. The problem is caused by the separation of management from ownership, which permits management to pay itself more than a market rate, at the shareholders’ expense. The solution is to restore the market for corporate control by repealing all the laws the make hostile takeovers too expensive, difficult or just plain impossible – get rid of the Williams Act, outlaw poison pills and staggered boards, etc., etc. The result: raiders will take over companies with over compensated management, fire all the greedy managers, hire new ones who will work for less, and keep the difference for themselves. The fear of being taken over would probably lead most CEOs to keep their compensation down to levels that wouldn’t attract raiders. This solution would solve the problem of excessive executive compensation completely, and I hope you will join me in urging its adoption.

By: Meta and Meta

Meta and Meta — Tue, 11 Apr 2006 16:42:19 +0000

Fas(cis)t Food

Okay, the title of this post is overstated, but, c’mon, this is a bit…hyperinvigilatory.

By: Bernard Yomtov

Bernard Yomtov — Mon, 10 Apr 2006 17:14:10 +0000

There are fiduciaries more at fault here than the executives.
First there are the board members who approve these deals.
Then there are the institutional investors – the mutual funds and pension funds who are supposed to represent their participants’ interests but don’t.
Then there is an entire set of political and legal structures and rules, including SEC regulations, that makes it extremely difficult to hold any of these people accountable.

By: cdammers

cdammers — Mon, 10 Apr 2006 17:13:39 +0000

Yes it’s a scandal, but I have relatively little sympathy for the shareholders who rubberstamp these pay rises every AGM. Yes it’s unfair on the people who put their pension money in firms like Verizon, but then again people should invest their pension money in funds that take an activist approach.

By: Thomas

Thomas — Mon, 10 Apr 2006 17:04:24 +0000

Mark, let me congratulate you for recognizing what so many others don’t: officers of a corporation owe fiduciary duties to stockholders, and those duties might limit their compensation. I can’t tell you the number of lawyers who just don’t get this. Now, there’s more to any argument about executive compensation, and certainly market forces and the rest are relevant, but we can’t forget we’re talking about fiduciaries.
Note that “management” doesn’t make disclosures regarding the compensation determinations made for the CEO and other senior executives. Those disclosures are made by the compensation committee. Compensation committees typically have a right to choose their own experts, including their own compensation consultants. I imagine that, after this NYTimes story, most will look again at their choice.

By: Jay C

Jay C — Mon, 10 Apr 2006 16:40:32 +0000

An “astonishing” loophole in SEC regulations? Why, given the Government’s accomodation to corporate interests, should this be astonishing?
Want to take a bet on how quickly this loophole will be closed?

By: Terry Ott

Terry Ott — Mon, 10 Apr 2006 14:41:12 +0000

As a management consultant (never consulted on executive pay), may I suggest your wording be altered, from: “…firm which approved…” to something more accurate in terms of the typical consultant/client relationship.
In my experience (and according to how I read the article in this Verizon case), a consulting firm provides data and input, advises and presents pros/cons, formulates alternatives (where appropriate), makes recommendations, and “helps” those making decisions.
Might the consulting firm have “recommended” what turned out to be the actual amount and form of the Verizon CEO pay package? Perhaps; even probably. But not necessarily.
In fact, a reason some of my former colleagues left the management consulting field is precisely that they don’t often get to “decide” or “approve” anything. You’re either content in a background role, enjoying respect for the value of your skill, input and ideas, or you’re kind of unhappy as a “powerless” consultant — and on your way to some other line of work.