Corporate Governance

NYTimes Editorial Refers Favorably to Bebchuk-Spamann Proposal

By Harvard Law School Program on Corporate Governance

In an editorial titled ?Of Banks and Bonuses,? The New York Times today expresses support for reforming pay in banks. Among possible reforms, the editorial describes as an ?insightful reform? a proposal put forward recently in a discussion paper by Lucian Bebchuk and Holger Spamann that the Harvard Program on Corporate Governance issued recently. The New York Times describes the proposal and the rationale for it as follows:

?An insightful reform recommended by Lucian Bebchuk, a Harvard Law professor and director of the law school?s Program on Corporate Governance, would require that executive compensation be tied not only to the company?s stock performance, but also to the long-term value of the firm?s other securities, like bonds. That would encourage executives to be more conservative about using borrowed money to juice returns to capital, because it would expose them to the losses that leverage can exert on all the firm?s investors.?

The New York Times editorial can be found here. The Bebchuk-Spamann discussion paper, ?Regulating Bankers? Pay?, can be found here. The proposed reform is also discussed in Lucian Bebchuk?s testimony before the Financial Services Committee of the House of Representatives, which is available here.

Full post as published by The Harvard Law School Corporate Governance Blog on July 27, 2009 (boomark / email).