10 March 2007

Who Do CEO's Work For?

This week I awoke to an interview with Treasury Secretary Henry Paulson. He made the most extraordinary comment: he said that he didn't support stockholders voting on CEO pay.

His is not such a unique opinion. In fact, I'm baffled by how common is his opinion. "You own the company but you have no say about the income of the top-paid employee," is what Henry is actually saying. It seems so obviously wrong that I hardly know how to comment.

And it is time to get beyond the joke ballots that these publicly-owned companies send out. There is no information about who we are voting for and rarely options. A typical vote is "Do you support the appointment of Nihal Mudvane to the board?" as if we had a clue who Nihal is or had an option to choose someone else.

Saddam Hussein won 98% of the vote in his last election. The Communist Party typically won about 99% of the vote during their rule over the USSR. Joke elections are evidence of joke governance.

If a company is going to enjoy the benefits of being publicly owned, if it is going to allow us common folks to own stock, the senior executives need to accept that they work for us, the owners. The elections of consequence should parallel the elections of free and open governments - be elections about policy options and about choosing between real people rather than rubber stamping a decision made months before.

4 comments:

choochoo said...

If people would just let me rule the world and everything in it, there would be no need to worry about stuff like voting. I already have henchmen lined up, and everything.

Ron Davison said...

choochoo,
I hear that there are small islands for sale. Perhaps you could begin your rule there. The island option has appealed to me more than once as a place to test out social policies.

Sandy said...

You seem to be the one with the false sense of ownership in a company. Partial ownership in a public corporation does not and should not guarantee all-encompassing rights to dictate deeply embedded business issues like CEO pay.

By the way, a great business leader is worth 10,000 employees easy.

Ron Davison said...

Sandy,
Interesting. You think that the people who own the stock ought not to influence CEO pay? Well, you're not alone but the justification for such an argument eludes me.

If I had a choice between a company with one CEO and no employees or 10,000 employees and no CEO, I'd bet on the employees every time.