Shareholders Alone Can’t Correct ‘Too Big to Fail’

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Published in The Nation November 23, 2009 by Zach Carter

During a House Oversight Committee hearing in October, a rare bipartisan consensus appeared to be building around a strategy to rein in executive compensation.
US banks, shareholders actually want their executives to be rewarded for taking on excessive risk.
“We need to empower the stockholders of public companies to better manage the package of pay and the incentive packages of their key executives,” said Representative Darrell Issa of California, the panel’s ranking Republican.
“Some constraints on these companies are necessary to protect the safety and soundness of the entire financial system,” said committee chair Edolphus Towns, a Democrat from New York. “We need to give the shareholders a way to get this under control.”
But while reinforcing shareholder rights may solve other corporate governance problems plaguing the US economy, like sloppy board oversight and managerial incompetence, shareholders are not going to end the bloated pay practices that have sparked outrage over the past year.

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