By Lee Harris, professor of corporate law at the University of Memphis and author, most recently, of Mastering Corporations and Other Business Entities.
Goldman Sachs, the former bailed out investment bank, wastes too much of the corporate wad on lavish compensation arrangements. Notably, for instance, the company recently announced that it was setting aside $16.7 billion for employee compensation. That's around $700,000 per employee. Really.
At a time when the economy is contracting and job losses expanding, such numbers have observers miffed. At least one pension fund, The Security Police and Fire Professionals of American Retirement Fund, which had invested in Goldman, has hired a lawyer and filed suit to try to put a stop the payout.
Fortunately, such suits raise the issues and send a message to leaders of public companies. But, unfortunately, there's little these shareholders or anyone can actually do to stop the Goldman-like bonanzas.
As it turns out, pay for performance at many U.S. firms is frequently anything but. Often executives at companies receive lavish incomes for average production. Worse, some get fortunes, even though their performance has been subpar. And, worse still, sometimes executives receive sheer windfalls, even while their performance has been awful.
In fact, the Goldman payout isn't the first time high executive compensation has raised shareholder ire.