In an editorial calling for companies to voluntarily allow non-binding shareholder votes on CEO compensation packages, the NYT warns that if companies don't allow such votes Congress may force them. It then adds that Congress "is not the place to set corporate salaries." Of course no one is proposing that Congress would set CEO salaries. Congress is debating a change in the rules under which CEO salaries are set, and in fact Congress is the place that such rules are set. (Sorry NYT editorial writers, they weren't handed down by God.) The rules of corporate governance are designed to prevent insider abuse. For example, they guarantee the protection of minority shareholders, so that an investor can't gain control of 51 percent of the shares and leave the owners of the other 49 percent with nothing. Excessive CEO pay is exactly the sort of abuse that rules of corporate governance are intended to prevent. If the current rules are inadequate to accomplish this task, then it is the responsibility of Congress to change the rules so that they do prevent such abuses. This is not interference in corporate governance, it is getting the rules right.
--Dean Baker
