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:
I have been observing with considerable skepticism the course of CEO remuneration over a number of years, having dubbed excessive CEO pay the “mad cow disease of the North American boardroom.” Empirically–as many who have spent much time in and around the boardroom will acknowledge–there is a point where additional tens of millions become marginal as an inducement to higher performance. In my view, that point occurs very early in the compensation tally.
There is the additional element of public opinion, which indicates that there is mounting outrage over what is widely perceived to be outsized senior level compensation. Those who think the only consideration with respect to CEO pay is how much firm “value” is created would do well to recall that capitalism has experienced periods where public opprobrium has translated itself into aggressive–sometimes even punitive–legislative action. If we are not at that point, we are perilously close to it. The current wave of abuses involving backdating in stock options has further reduced public confidence in the moral legitimacy of business leadership at a time when it is still recovering from the betrayals associated with Enron, WorldCom, and many others.