August 19, 2005

An Opportunity For Profit

Here's an Austin Bay guest blog for Glen Reynolds that got me thinking:

"What's the biggest problem plaguing corporate America?" he asked rhetorically. “Weak corporate boards that fail to protect shareholders rights."

One of his indicators of weakness: the prevalence of “golden parachutes” for executives.

“There's no penalty for executive failure,” he said. “The board members think it’s easier to cave in and pay off a failed CEO. Shareholders lose.”

So if shareholders financially lose by irresponsible corporate behavior in pay and perks, why isn't the behavior measured and corporations ranked on it? It seems that if shareholders pay for it and lose out in unrealized profits, investment money would be wise to steer itself towards companies that do a bit better in compensating for performance, not for mere presence in the executive suite.

Posted by TMLutas at August 19, 2005 11:24 AM