The expropriation of shareholder wealth by predatory corporate executives is one of the great scandals of the past quarter-century, and in particular the past decade. “Compensation consultants” play a central role in this marginally legal enterprise. (I say “marginally legal” because corporate executives, as fiduciaries for the shareholders, have a legal duty not to overpay themselves.)
Monday’s New York Times takes a close look at the compensation-consulting racket, which (due to an astonishing loophole in SEC regulations) is usually done anonymously. That is, management tells shareholders that the excessive paychecks of the CEO and his cronies were approved by an “independent outside expert,” but not who the alleged expert is.
A little snooping by the Times’s Gretchen Morgenson reveals that the “independent” compensation-consulting firm which approved a nearly $20 million paycheck for the CEO of Verizon in a year when Verizon saw its credit rating fall, froze pensions for its managers, and had its net income decline by 5% is also Verizon’s benefits manager, and has taken in about half a billion dollars from its Verizon account in the past decade. No doubt Verizon management will keep those dollars flowing as long as the consultant makes suitably generous recommendations about senior executive pay.
Quite a cozy little arrangement. And remember, this is the stuff corporate executives don’t go to prison for. No wonder the moguls were so willing to hire lobbyists like Abramoff and contribute to politicians like DeLay. Men after their own heart.