April 7, 2006
I favor SEC rules requiring clear disclosure of all top executive compensation whether in cash, options, expenses or any other.
This is the least that should be done.
Top executives in many cases are "milking" corporations. The CEO in practice selects the board members who are well-compensated (in addition to receiving the enormous value of networking) and therefore unlikely to defy the CEO and get expelled as "not a teamplayer". Similarly the other special committees for compensation decisions, auditing decisions, and others, are not in the least independent and usually simply carry out the CEO's wishes. In fact, it is common for the CEO and a few of his closest cronies to constitute an executive committee which decides everything in advance of board meetings, which decisions are then presented to the entire board which is unable to evaluate them. They are recommended but are really faits accomplis.
After you put through this disclosure requirement, consider making the audit committee truly independent by removing it from the board altogether. Provision should be made for a Shareholder's Committee, the membership of which chooses the outside auditor and negotiates with it to get the most truthful reports possible, free of all accounting gimmicks intended to mislead. This committee would be open only to shareholders and cost a minimum of, say, $1,000 a year. This would assure that mostly only large or institutional shareholders would participate. They would thus be able to have the resources and time to devote to this activity. Most important, they would not be beholden to the CEO.