Tuesday, November 17, 2009

Say-on-Pay


Christoper Dodd is the chairman of the Senate Banking, Housing, and Urban Affairs which is in charge of "reforming" the Financial System.

One of Dodd's cornerstones to financial reform is the "Say-on-Pay" provision of the bill. In theory, the shareholders of a company will get a "say" on the "pay" packages of the executives. Since the shareholders are the ultimate owners of the company anyway, his theory is that the shareholders will punish the executives for poor performance.

Lets forget for a minute that Christoper Dodd has never actually run a business. Lets also forget for a minute that he's been in the ivory towers of Washington for the last 34 years and has no clue about how business runs (unless you count participation in Countrywide sweetheart deals as "business" experience).

Of course, if Christoper Dodd did run a public company, he would understand that the majority of shareholders are institutional investors and not individual investors. Mutual Funds, Index Funds, Hedge Funds, Pension Funds, and other institutional investors comprise more than 50% of all shareholders. These institutional investors hold stock in many companies. The institutional investor hasn't shown any interest in the past about day-to-day management of the company.

So Dodd wants to put this rule in place and nobody will care. That's constructive use of his time and our tax money. It's time for Connecticut "Say-on-Pay" for Mr. Dodd and adjust his compensation to zero in 2010.

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