The lesson of Countrywide is instructive at a time when there is considerable pressure to retreat from Enron-era reforms, with many claiming they are too costly and not necessary. On the contrary, Countrywide shows that improvement is far from universal when it comes to corporate governance and that, once again, excessive CEO pay is still the Typhoid Mary of the boardroom, showing up time and again just before calamity strikes, as it did with Enron, WorldCom, Tyco, Adelphia, Nortel, and more. It also shows that a single company’s misjudgments can carry profound consequences for other corporations, public institutions and a wider community of interests, which is why society itself has a considerable stake –separate and apart from that of shareholders– in seeing CEO pay returned to reasonable levels.
I have a guest post on the corporate governance blog of Harvard Law School. This is an interesting site where you can find the thoughts of some of the leading legal scholars in the field. It often prompts some lively (or what passes for same on the part of lawyers) exchanges on corporate governance and CEO pay matters from students, faculty and prominent figures in the legal community.
Here are a couple of excerpts from my post: (more…)