January 25, 2011
I understand that you are considering rules on executive compensation, a rather "hot" topic. Here are my thoughts:
As a general rule, businesses should be able to determine executive compensation without government intervention. But the financial disaster of the past couple of years highlighted one aspect that bears government ruling. I refer to the practice of "guaranteed bonuses" (some VERY LARGE) given to executives and employees REGARDLESS OF RESULTS.
When a company shows a profit, it seems to me that it is the business of that company to determine how to reward those responsible. But when a company shows a loss (and in the past couple of years, there were some VERY LARGE losses), it makes no sense at all to REWARD those responsible for the losses.
Rather than have the government intervene (we don't need more government intervention), it would be simplest to pass a rule that when a company shows a profit, the company can issue bonuses as it sees fit. But when a company shows a loss, it should be REQUIRED to gain SHAREHOLDER APPROVAL for any and all bonuses.
Simple test - did the company report a profit or a loss. If profit, don't bother the shareholders. If loss, then shareholders MUST be given the opportunity to either approve or disapprove ANY bonuses.
I agree with the concept of a non-binding poll of shareholders for executive compensation, but I think that my suggestion for bonuses tied to performance should be a BINDING VOTE of shareholders, enforced by SEC regulation.
Thank you for your time.