Scapegoating for votes

Posted by Marc Hodak on April 11, 2008 under Executive compensation | Be the First to Comment

Whenever I’m debating the merits of “Say on Pay” with an earnest advocate, they invariably contend that they are not against CEOs making a lot of money per se, they are only concerned that CEOs make it fairly. They contend that the current system unfairly rewards CEOs due to the laxity or corruption of directors who set their pay, and that giving investors some say over executive compensation will remedy that problem.

One can dispute both of those premises without attacking the motives of those in favor of “Say on Pay,” and I have done so here and here. But I have not been above attacking their true motives, too, here and here. Alas, nothing makes it easier to attack their motives than simply listening to the political supporters of “Say on Pay” on the campaign trail.

Obama, gunning for blue collar votes in Pennsylvania, has been highlighting his support for this regulation, saying that “CEOs make more in one day than their workers make in one year.” Politically speaking, it certainly makes more sense to attack the rich with a subtle conspiracy theory than to expect voters in middle America to digest the subtle governance issues actually being debated in this bill. Obama can conclude that if well-regarded Harvard academics are in favor of it, it’s safe to exploit his support for the bill by any means necessary.

“Say on Pay” proponents may contend that just because most of its supporters are appealing to envy, out of more concern with social issues than governance issues, it doesn’t mean that advocacy on the governance issues is inappropriate or insincere. True enough. But these same advocates generally hold the trump card of politics over rationality: even if there is no evidence that “Say on Pay” will actually help the shareholders, they will tell you, “If we don’t pass this, Congress will come up with something worse”–a veiled threat of substantive regulation of pay. Which is just saying that one should accept a poisoned slice instead of a poisoned loaf.

Thanks.