The Wall Street Journal has reported that many corporate boards are attempting to reform their compensation practices by changing the nature of their relationship with compensation consultants. Many observers have noted for several years the inherent conflict of interest that exists when compensation consultants are brought in to make recommendations on the pay of the same managers who have the power to direct additional consulting business to the same firms. The “solution” some boards seem to have come up with is to continue using compensation consultants but to limit any additional work given to these firms. Read this article for more details.
At the end of next month, many investors will look back at a “lost decade” marked by multiple financial crises, poor overall stock market performance, and periodic revelations of serious incompetence reaching the highest levels of corporate America. Investors can be forgiven for being cynical about prospects for reforming executive compensation but should also be aware that their own complacency has contributed significantly to the problem. Read this article for more details.
In the Fortune magazine interview shown below, Goldman Sachs CEO Lloyd Blankfein provides his insights on the overall economy, prospects for job growth, and the controversy surrounding his firm’s compensation practices. Read this article for some background information and to view the video.
Anyone reading this who is a taxpayer in the United States is, in effect, a shareholder of AIG due to the Federal Government’s infusion of $173.3 billion in bailouts over the past six months. These bailout funds have resulted in the near total nationalization of AIG with the Federal Government owning nearly 80% of the business. Putting aside the question of whether the government was correct to bail out AIG in the first place, it is very important to look at the potential problems that now exist as a result of government ownership and the political, rather than economic, calculations driving the operations of the company. Read this post for one viewpoint regarding the bonus fury at AIG.