“So, we’re like shareholders, and you have a responsibility to us”

Posted by Marc Hodak on October 29, 2008 under Executive compensation | Read the First Comment

Andrew Cuomo is going after the Wall Street bonuses that pay his salary every which way.

First this argument, taken directly from Tony Soprano:

Now that the American taxpayer has provided substantial funds to your firm, the preservation of those funds is a vital obligation of your company. Taxpayers are, in many ways, now like shareholders of your company, and your firm has a responsibility to them.

Translation: “When your shareholders were merely institutions, pension funds, and assorted traders, widows and orphans, you could do whatever you thought was right. But with taxpayers as investors, you will do what I think is right.”

Of course, the Delaware courts have strongly ruled that shareholders can’t second-guess the board on what they think they need to pay managers in order to attract and retain their services. Which is why companies incorporate in Delaware instead of, say New York. Andy supported his threats using a New York law, a la role model Spitzer, that “permits the recovery of payments worth more than the services provided by executives.”

Excuse me, Mr. and Ms. Juror, do you think this guy was worth $763,249 last year? Here, let me explain roughly what he did… So much for business judgment.

Andy’s other ploy is another law from the code on debts:

Specifically, corporate expenditures and payments, made in the absence of fair consideration of undercapitalized firms, may well violate NY Debtor and Creditor Law 274, which deems such payments illegal fraudulent conveyances

What, you didn’t know that every dollar you paid Joe might be used to pay down your debt instead? Well, you have 10 years to think about it, with time off for good behavior.

I don’t think Mr. Cuomo talked to the Governor recently, who was in Washington begging the Federal government to save New York from massive cutbacks. Stopping some of the wealthiest, taxpaying New Yorkers from getting their full pay, and probably chasing them away, is likely to greatly help things. By “help things,” I mean Mr. Cuomo’s gubernatorial aspirations.