A small positive step, but a positive step:
Posted by DeLong at June 26, 2003 09:53 PM | TrackBackWSJ.com - SEC Is Set to Require Clearance By Holders of Stock Compensation: WASHINGTON -- The Securities and Exchange Commission is expected to approve a rule Friday requiring companies listed on U.S. markets to win shareholder approval of all stock-compensation plans, according to people familiar with the matter.
The long-awaited move will essentially prevent companies from awarding lucrative stock-option packages to executives, directors and others without explicit shareholder approval. Brokers holding shares for their clients will also be barred from voting on equity-compensation plans unless the owner has given voting instructions.
The SEC will direct the New York Stock Exchange, the Nasdaq Stock Market and other major markets to include the rule as part of their listing standards, beginning Monday. Listing standards require issuers to follow certain rules or face being bumped from trading on that market. While the NYSE and Nasdaq set their own requirements for listing shares, they must be approved by the SEC.
Investor advocates have pushed for greater shareholder control over equity awards as a way to oversee management and ensure that the stock isn't diluted by generous grants of stock or options.
All over the joint ya got flag-steerers: people who think they can steer the boat by starching a flag, ironing it, and putting it up the yardarm pointing in a different direction.
Now let's clear up the executive compensation thing here first: it's mostly animal stuff. (I'm intersted to see my frenemy Newt in today's NYT pushing some hominid book. AISMOC, I agree with him.) What are most executive salaries all about? Like what do these guys do?
Top level business is mainly symbolic action -- priesthood type stuff -- and the actual "work" consists of hand waving... We pay these guys because they're our priests.
So?
So does "controlling" their salaries make any sense at all? Of course not. That's just flag-steering.
What will change corporate salary madness?
Stronger trade-unions would probably help a bit. This is largely a matter of stomping America's viciouly anti-labor laws. I don't know what we're gonna do about the press -- ever damn soul a member of the Guild but all of them crazy anti-labor to their marrow.
This, however, does not seem to me the big thing. The questions are two, imho, why does a metastatic growth like , e.g., General Motors make any sense at all? And why would young kids starting out in life think of going to work for such a monster?
"Upper class" kids get to hitch-hike to Katmandu; other kids can only get out of "Kansas" by joining P&G?
Enough: we are paying top monkey top money because we are behaving like little monkeys. Capping top monkey's salary is not the way of changing this.
There is no reason to pay the top monkey(s) top money for doing a bad job. In addition there is no reason to pay these monkeys top money for doing an average job. There is also no legitimate reason for paying top money to keep these monkeys when they have already run the business into the ground (as seen during bankruptcy.) The government should also take a look at why these salaries bonus are tax deductible.
I am all for throwing cash at a rain maker, but they better make the rain. These companies should make the packages more performance based. Stock options should have done this. The problem is many boards re-set the option price executive stock packages when a companies stock does not perform well. How does this help the rest of the share holders?
Posted by: james on June 27, 2003 08:23 AM