The notion that corporate executives are paid too much money is very old. Everyone protests the habit and says the system should make compensation more reasonable. But, big company CEOs still make tens of millions of dollars. One excuse is that they are worth it. They create a lot of shareholder value. Another argument is that they have contracts that require they be paid well and that, if they are not, they will leave and join the competition.
Andrew Cuomo, the NYS Attorney General, thinks that it is wrong that some of the top people at AIG got big comp deals while the place was falling apart. For some reason, he is not suggesting that CEOs at companies that do remarkably well get a lot more money. That seems a bit one-sided.
According to The Wall Street Journal, Cuomo wants to know more about "extraordinary expenditures in the form of executive compensation payments, junkets and perks for its executives." If he wants to be governor like his father was, this kind of visible investigation is important. He can’t buy the exposure.
The "junkets" part of the probe seems fair. The objection to compensation is tantamount to saying that public company boards cannot set management compensation, something which they have done for decades and is part of many company’s corporate bylaws. It is protected by years or precedent and probably the powers of the remarkably pro-business Delaware court system.
The methods for getting at executive pay are supposed to be though governance provisions which allow shareholders to pressure boards for more management accountability and more reasonable pay. The system has not always been effective, but it may be a tad better than letting the NYS Attorney General set CEO pay at any company with its headquarters in the Empire State.
If Cuomo digs up fraud, all bets are off. He will raid AIG offices and take out management in handcuffs and with rain coats over their heads. Good for him.
Joining the compensation committee at AIG may be outside Cuomo’s charter
Douglas A. McIntyre
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