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Executive Salaries and Barney Frank
By Theodore Sares

In a recent editorial in the New Hampshire Business Magazine asking the readers to "Heed the President on Executive Salaries," it mentions a proposal by U.S. Rep. Barney Frank which would require shareholder approval of executive compensation plans. While the idea per se is a bad one, the fact that Frank is involved is downright horrifying. Talk about letting the fox into the hen house. This politically inspired (read Democratic initiative) move on Executive Compensation is reprehensible in term of our free enterprise system... one in which Frank would love the government to intervene. What's next, salary caps on executive compensation? Government bureaucrats sitting on Boards?

The Coca Cola Co. has instituted a significant new plan for compensating its directors: they will not receive payment unless the company meets its financial targets. But even if other corporations adopted similar arrangements, it would do nothing to dispel the rampant suspicion that successful directors and managers are overpaid...a suspicion the witty N.J. Rep exploits. But the fact is, successful CEOs, like football, basketball and baseball stars, are indispensable to their companies (and teams). They earn their rewards. Though the efforts of CEOs are not televised like football games, their achievements are real and have a profound impact and benefit to all our lives. Maybe it's time we learned to appreciate their efforts and recognize they deserve every penny of their salaries. If Kobi Bryant can make millions, why can't someone like Jack Welch or Lee Raymond?

How big an influence can one man have on the fortunes of the entire corporation? Consider Jack Welch's considerable impact on General Electric. Before his tenure as CEO, the company was a bloated and floundering behemoth. Splintered into dozens of distinct and inefficient business units, it was barely profitable. Welch turned things around by streamlining and reorganizing the company's operations and implementing a rock solid business strategy that yielded more than $400 billion worth of shareholder wealth. For this he was extremely well rewarded. But the ever-so-witty and opportunistic Frank probably would have labeled his compensation "obscene."

If allowed, the knee-jerking Frank would love to intervene in and affect the income distribution inherent in our economic system, but this intervention smacks of hypocrisy and worse. If anti-business Frank wants to work on income inequality, maybe he can work to reduce congressional salaries, which average $165,000 and include a juicy set of benefits that come directly out of the taxpayers' pockets. But no, he demonizes those who work hard, become educated and become successful as a result. Somehow, they're bad because they don't deserve the money they earned. If so, why does Frank deserves his?

No one is arguing that many of the excessive severance packages are incomprehensibly triggered when executives are getting fired for poor performance. These kinds of payments are incongrous with pay for performance and reflect a callous disregard for those in the office cubicles or on the factory floors most of whom are shown the door when they get fired. But such juicy packages often reflect the kind of companies that pay them....companies clearly lacking appropriate values.

More to the point, while such packages may be indicative that the company's Board of Directors is not overseeing management close enough, the examples of corporate scoundrels slurping at the trough are not so numerous that the likes of Barney Frank should jump in to "save" the day. When Boards reflect a lack of appropriate governance, investors, shareholder groups and shareholder activists are quite capable of moving in to rectify matters.

The markets will take care of "the business of business." "The Sarbanes-Oxley Act of 2002" was more than enough. Barney Frank and a Federal government that should place its focus elsewhere should mind their own business.

Ted Sares, PhD, is a syndicated writer

Article Source: http://EzineArticles.com/?expert=Theodore_Sares
http://EzineArticles.com/?Executive-Salaries-and-Barney-Frank&id=463616

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