TARP compensation rules: Part deux

Posted by Marc Hodak on April 21, 2009 under Executive compensation, Self-promotion, Stupid laws | 2 Comments to Read

The second installment of my Lombard Street article here.  Sample:

The clearest evidence of popular envy being the root of these provisions is the clause requiring the board to review “luxury” expenditures—a kind of Optics Committee—for items like office decorations and corporate jets. Clearly, these expenditures are far more material to the press and public than they are to the shareholders. Does it really matter to the shareholders if the company’s most valued employees benefit from nice offices? Sure, there is a crude sense of entitlement that drives an executive to spend a lot on lavish appointments, but such appointments tend to be personalized, which arguably creates a retention benefit, especially in situations where bonuses are otherwise being suppressed. Corporate jets might be a frivolous expense, or they may be a cost effective way to provide efficient and secure transportation to busy executives. The ARRA law leaves it up to the board to make such determinations on behalf of the shareholders, but this is a canard; boards already make these determinations. The real purpose of this clause is use public sentiment to eliminate perks on no firmer grounds than the grade school “chewing gum rule”—if I can’t have some, nobody else can.

  • jd said,

    Another great article, Marc!

  • it is stupid said,

    the perks and all the corporate greed are going to down this country for good right at a time when this country is on its knees. I guess these stupid laws can have something to do with it. But if you step back and think about it there are some pretty stupid laws !!

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