Executive Pay: Shareholder Control versus Government Control

The issue is less on who controls executive pay but rather do we want the government involved in business enterprises. I agree with critics of executive compensation that there should be accountability for performance and a link between performance and bonus payment structure. Bureaucracy is inherent in government programs and if we allow the “Pay Czar” to dictate pay structure in our companies that receive “bail-out” funds, the czar will not stop there. Power corrupts. Shareholders should influence executive compensation but the system of proxy voting is indeed slanted to the benefit of the corporation or the liberal agendas of political action committees and other lobbyists s who have the time and money to mount campaigns to effect change. But I have my doubts as to the support of their “change agendas”.

As a former portfolio manager of a 1940 Act mutual fund I voted proxies for the companies held in my fund. I like to believe I was responsible in my voting of said proxies, but rarely if ever was compensation a point of a shareholder vote. Shareholders attempted to get the issue on the ballot but rarely was it ever there and even rarer for the vote to be cast in the majority for the pay to be reviewed let alone constrained. Still, in a capitalist society (while we are a republic, capitalism is the basis of who we are as US citizens) there is no room for the government to dictate profits, business plans, and compensation. Enable the shareholder and owners of businesses do that. I do not trust my government to manage private businesses anymore than Thomas Jefferson did 210 yeas ago.