Give shareholders a vote on pay; but don't let others interfere
According to The Economist:
OBSCENE”, “bizarre”, “a scourge”: Europe's politicians are in no doubt that bosses' high pay is a scandal. If they are right, the continent's companies are in grave danger. Executive pay is not only a measure of what society judges as fair; it is also a test of whether a business is run for its shareholders. If a board can motivate managers, it will get the best out of them. If it cannot stand up to the chief executive and his cronies over their pay, then it will struggle to control them when they want to buy this dud rival or diversify into that dead-end business.
But are the politicians right? They have caught the mood in equality-conscious Europe, where the millions earned by some are stirring up resentment. Politicians in the Netherlands, France and Germany are squaring up to bosses over pay (see article). America is joining in. John McCain, the presumed Republican presidential nominee, this week complained that failed senior managers at big firms are “packed off with $40m or $50m for the road”.
It is easy to find executives who look undeserving—or worse. The head of ABN AMRO, a Dutch bank, won a €26m ($40m) pay-off when his poorly performing bank was bought by a rival. Chuck Prince, of Citigroup, and Stan O'Neal, of Merrill Lynch, walked off with far more, even as the banks they left behind were on their knees. And tens of millions were paid by friendly boards to Richard Grasso at the New York Stock Exchange and Ray Irani at Occidental Petroleum.... click to continue.
