A boss of mine once derided me for leaving him a “turd on the table.” In other words don’t bring him a problem without bringing him a solution. I guess I’ve done just that with “The Camel's Nose” blog entry. So, I will try to solution things. Unfortunately the riposte isn’t easy. The answer needs to rein in excessive executive compensation without the heavy hand of government which, if we have been awake these last twenty years, invariably brings with it more problems than it solves (witness the “Community Reinvestment Act” of 1992 which is the genesis of our current economic meltdown.)
Since the Board of Directors and the Executive Compensation Committees of corporations are where these problems start, this is where the solution must also begin. Therefore, I suggest the following remedies be enacted into law:
1) All senior executives and Board of Directors members must disclose annually in each company’s Annual Report and 10K what other corporate boards they sit on, what all their compensations, perks and considerations are from this company, and what conflict of interests they might have or have had to the financial well being of said company or to the benefit of some other entity. (For instance Edward Liddy, CEO of AIG would have to disclose that he previously sat on the Board of Goldman Sachs to which AIG funneled $12.9 billion of federal bailout monies.) These disclosures must be made fully, without obfuscation, and under the threat of severe penalties from the SEC and/or the civil justice system. I might even consider a special federal tribunal being set up that overarches state courts in these specific cases.
2) No Board member or corporate executive of a public company may also be involved, either directly or indirectly, in the political arena whatsoever.
3) All members of the Executive Compensation Committee must be outside Directors, must have had experience in constructing executive compensation packages, and the majority must come from entities which have meaningful investments in said company. They must state in writing in the 10K the specific reasons for each executive’s compensation package and disallow any variance from the terms of these packages. The SEC and general public would have the same redress options for failures under these terms as in #1) above.
4) No corporate executive or Board member can be an officer or in any way benefit from the operations of a subsidiary or non-public entity of said corporation. In fact, all off-balance sheet transactions must be fully disclosed and accounted for in the 10K of said corporation.
5) All offshore subsidiaries of said corporations need to comply with these laws as though they were operating in the United States.
Since the Board of Directors and the Executive Compensation Committees of corporations are where these problems start, this is where the solution must also begin. Therefore, I suggest the following remedies be enacted into law:
1) All senior executives and Board of Directors members must disclose annually in each company’s Annual Report and 10K what other corporate boards they sit on, what all their compensations, perks and considerations are from this company, and what conflict of interests they might have or have had to the financial well being of said company or to the benefit of some other entity. (For instance Edward Liddy, CEO of AIG would have to disclose that he previously sat on the Board of Goldman Sachs to which AIG funneled $12.9 billion of federal bailout monies.) These disclosures must be made fully, without obfuscation, and under the threat of severe penalties from the SEC and/or the civil justice system. I might even consider a special federal tribunal being set up that overarches state courts in these specific cases.
2) No Board member or corporate executive of a public company may also be involved, either directly or indirectly, in the political arena whatsoever.
3) All members of the Executive Compensation Committee must be outside Directors, must have had experience in constructing executive compensation packages, and the majority must come from entities which have meaningful investments in said company. They must state in writing in the 10K the specific reasons for each executive’s compensation package and disallow any variance from the terms of these packages. The SEC and general public would have the same redress options for failures under these terms as in #1) above.
4) No corporate executive or Board member can be an officer or in any way benefit from the operations of a subsidiary or non-public entity of said corporation. In fact, all off-balance sheet transactions must be fully disclosed and accounted for in the 10K of said corporation.
5) All offshore subsidiaries of said corporations need to comply with these laws as though they were operating in the United States.
6) Corporations should stop indemnifying directors from bad decisions AND paying them the big fees, stock options and perks -- possibly one but not both.
This, at least, is a start … and relies as little as humanly possible on the government actually running things.
This, at least, is a start … and relies as little as humanly possible on the government actually running things.
No comments:
Post a Comment