On Executive Pay

Sunlight is supposed to be the best disinfectant. But there’s something naïve about the new S.E.C. rule, which presumes that full disclosure will embarrass companies enough to restrain executive pay. As Elson told me, “People who can ask to be paid a hundred million dollars are beyond embarrassment.” More important, as long as the system for setting pay is broken, more disclosure makes things worse instead of better. We don’t need more information. We need boards of directors to step up and set pay themselves, instead of outsourcing the job to their peers.

James Surowiecki 
Open Season
The New Yorker

October 21, 2013

Surowiecki is nobody’s idea of a conservative, but he is going in the right direction with this. The problem here is that boards have lost control of their companies. The way to get boards to “step up” is make sure that the right people know about the pay disparity, and are ready to punish the company for it.

If you want to change executive pay, get shareholders and consumers to vote with their pocketbooks and refuse to patronize or invest in a company that pays the folks in the C-suite more than, say, 25 times the salary of the lowest-paid worker. That will get the ball rolling.

But the idea that regulation is going to fix this problem – and not simply drive it underground – is naive in the extreme.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s