If there is an issue that has united popular indignation, Left and Right alike, executive compensation surely ranks near or at the top. But the bipartisan opposition to recent pay increases for the CEOs of mortgage conduits Fannie Mae and Freddie Mac, while highly understandable, misses the larger point. Several months ago, these companies, which account for nearly half the outstanding home mortgage debt in the U.S. and which since 2008 have been wards of the government, announced plans to raise annual CEO pay from $600,000 to $4 million. Their overseer, the Federal Housing Finance Agency, approved the hikes. In response, Congress overwhelmingly has passed (or is on the verge of passing) bills to roll them back. Lawmakers would do better to allow the firms to operate freely and without subsidies.
Submitted by NLPC Staff on Tue, 03/13/2012 - 08:37
NLPC Associate Fellow Fred N. Sauer asserts that General Electric is no longer a great industrial company, but is now dominated by its General Electric Capital Services (GECS) division. Contrary to the conventional wisdom of the financial media that GECS has been GE's strength in recent years, Sauer argues that GECS is dangerously reliant on short-term financing to support its own lending. The result is a company ultimately dependent on political influence to mitigate the risk, creating opportunities for the well connected, like Warren Buffett.
As someone who has sponsored "Say on Pay" shareholder proposals with companies like Boeing and Procter & Gamble, I wonder whether SEC-mandated votes on executive compensation will do any good. In fact, I worry that it may lead to a false sense of shareholder empowerment.
Yesterday, the Securities and Exchange Commission voted 3-2 to adopt a rule requiring public companies to hold an advisory vote on executive pay at least once every three years.