According to this article in The New York Times business section,
Demoncrats Democrats have introduced (again) a bill that would give shareholders of publicly held companies a nonbinding vote on pay packages and so-called “golden parachute” compensation plans for senior executives. It is an idea whose time has come. Indeed, shareholders of British companies have held this power since 2002 but only voted against an executive pay package once.
What’s especially interesting to me, and probably predictable, is that Republicans oppose the measure. Although the article suggests that such a vote would permit shareholders to exercise considerable influence, I can’t see how a nonbinding vote would be too difficult to ignore. Indeed, decision-makers who award executive pay have ignored economic reality at lots of companies even while those companies are unprofitable or in bankruptcy. And besides, everyone already knows that pay packages have grown from tens of times the lowest yearly company wage to hundreds of times that wage in the span of about 25 years.
If that weren’t rich enough, how about this argument by Representative Spencer Bachus of Alabama of the House Financial Services Committee:
“How many times has this Congress substituted its judgment for the American people? For people in business? That is again what this legislation is doing. Congress should never rush in and begin to change the free-enterprise system, our system of competition between companies.”
Isn’t Congress empowered to substitute its judgment for that of the American people? Isn’t that in fact its job? Bachus is clearly a market fundamentalist, believing that regulation, restraint, and any impediment to free enterprise is uncalled for. Considering just how toothless this proposed legislation is to begin with, why is it necessary to fight it so hard with such overblown rhetoric?
Update: Fixed misspelling of Democrats. And in case my arguments lacked currency, it was announced yesterday that the Chief Executive Edward Whitacre of AT&T will be retiring in June and will receive a $158.5 million retirement package.
According to a proxy filing with the Securities and Exchange Commission, Whitacre’s retirement package will include $24,000 in annual automobile benefits, $6,500 each year for “home security,” access to ATT&T’s … corporate jet for 10 hours a month and $25,000 to cover his country-club fees ….
That report also provides this link to a report last year about CEO pay. Finally, a NY Times column by Paul Krugman titled “Gilded Once More” (sorry, Times select, so no link) reports that income inequality is back to levels known in the Gilded Age. He has a particularly outrageous case in point:
<>Last year, according to Institutional Investor’s Alpha magazine, James Simons, a hedge fund manager, took home $1.7 billion, more than 38,000 times the average income.
So I was wrong in saying that some folks make hundred of times the average yearly wage, it’s now thousands of times.