Thursday, March 20, 2008

Congressional Witch Hunt On Financial Services CEO Pay

The March 11 edition of the Wall Street Journal carried an article by the Journal's minority-owned unit,, regarding the recent Congressional hearings on financial service company CEOs' compensation. I also happened to have caught some of the witch hunt live.

One satisfying aspect of the breakingviews column is that they recommend a set of fixes, all of which echo my own ideas from prior posts. They include: paying large incentive compensation in company equity; lagging incentive compensation to match long term corporate performance, and; provision for effectively escrowing such compensation, in order to recapture it, should performance reverse.

That said, however, I don't believe any of this should be regulated. It ought to be the responsibility of boards of directors to do this, or face shareholder lawsuits. In this day and age, it is a simple task for a board to hire a reputable external compensation consultant to design a 'best practices' suite of senior executive compensation guidelines.

Why the US Congress should meddle in how publicly-held, private enterprises choose to compensate their executives is unclear to me.

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