Thursday, June 16, 2005

Raise the Price of Fame?

The premise of Norman Augustine's opinion piece in the NY Times leaves me befuddled. Here's a snippet:

**The occasional good chief executive aside, how could anyone defend the extravagant compensation of Bernard J. Ebbers (who pocketed more than $400 million in salary and company-secured loans before WorldCom crashed); Kenneth L. Lay (who received more than $100 million in compensation the year Enron went belly up); or Richard M. Scrushy of HealthSouth ($125 million over five years).

Assuming that having Congress seek to influence pay scales in the private sector is good public policy, we must ask ourselves - even recognizing that chief executives are now about as popular as Attorney General Eliot Spitzer at a Business Roundtable picnic - why focus only on chief executives?**

And what public policy, exactly, does influencing private pay scales support? Augustine's public policy seems like a substantive unconscionability or "shocks the conscience" approach to compensation. If it's "just too much," we have to do something about it.

Why?

I want someone to come up with the best argument they can. "It's just too high" isn't an argument. Is it that corporate boards don't really care about shareholders, and just want to enrich their friends in management? Meanwhile, shareholders are too lacking in influence or lazy to do anything about it?

I want to know what makes a former CEO like Augustine think this way. Tom, maybe you know. It's completely beyond me.

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