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: Conglomerate

Last Week's News Part II: Independent Compensation Committees

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

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Apparently the fetishization of independence springs eternal.  A quote from the government's fact sheet: "The new requirements will mandate that each member of the compensation committee meet, in addition to the current independence standards of the major exchanges, independence requirements similar to those for audit committee members under Sarbanes-Oxley. This high standard will ensure that compensation committee members will be truly independent when setting executive pay on behalf of shareholders."

Got a problem?  Think that executives are overpaid?  The independent director to the rescue!  Never mind that the NYSE and NASDAQ already require that compensation committee members be independent, i.e., comply not only with SOX's requirements, but also with exchange-specific rules.  I'm ranting a little because relying on independence--which is by definition the lack of a quality (ties to management)-- to achieve a positive regulatory result strikes me as naive at best, and distracting at worst. 

On the other hand, since I'm skeptical of all regulatory efforts to curb executive pay, maybe toothless reform is better than real reform.

 


 

Full post as published by Conglomerate on June 17, 2009 (boomark / email).

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