Kenneth Feinberg is the White House Special Master for Executive Compensation, and he is tasked with placing restrictions on the pay showered upon the executives of seven companies whose continued existence owes a debt to the American taxpayer. Those companies are American International Group, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors, GMAC and that's it.
Charles Schumer is a senator from New York, who, with Senator Maria Cantwell (D-Wash.) have proposed a "Shareholders Bill of Rights" that would allow corporate shareholders to have a stronger hand in corporate governance. Schumer has recommended to Feinberg that the "Shareholders Bill Of Rights" be applied to the seven companies under Feinberg's purview.
These are facts, learnable and knowable by all homo sapiens with adult levels of cognitive development. And yet, somehow, the Wall Street Journal has conflated Schumer's legislative proposal with Feinberg's mandate and reversed the direction:
Federal pay czar Kenneth Feinberg is cracking down on executive pay at the big financial firms where the government has a stake. Sen. Chuck Schumer (D-N.Y.) is mulling a law to apply the new rules to all public companies.
See, if the intended antecedent to "the new rules" is a "cracking down on executive pay," then this lede is just plain incorrect. What does the "Shareholder's Bill of Rights" offer in terms of "new rules?" Let's check in with Pat Garofalo, over at Wonk Room:
Schumer introduced the Shareholder's Bill of Rights in May with Sen. Maria Cantwell (D-WA), and the bill lays out a series of provisions aimed at improving corporate governance -- and hopefully reining in corporate excess -- by empowering shareholders with more influence over their company's decisions. The bill would:
- Implement "say-on-pay," which mandates that shareholders hold a non-binding vote on their company's compensation packages;
- Require that companies allow shareholders access to the company's ballot if they want to nominate directors for the board, require board directors to receive at least 50 percent of the vote in uncontested elections in order remain on the board, and require all board directors to face re-election annually;
- Mandate that companies split the jobs of CEO and Chairman of the Board and that public companies create a separate risk committee comprised of independent directors.
Nothing in Schumer's "Bill Of Rights" calls for or implies that the executive compensation of all public companies will be put under the purview of a centralized government administrator.
In fact, one need only read Schumer's letter, upon which hangs this entire Wall Street Journal article, to see that Schumer makes an explicit distinction between his proposals and Feinberg's task:
While reigning in compensation practices at these firms is certainly necessary to ensure that taxpayer money is well spent and not squandered on lavish pay, executive compensation is just the tip of the iceberg when it comes to the practices that so recently put our entire financial system at risk. When it comes to effective risk management, the buck must stop with the board of directors.
When directors fail their shareholders - to whom they owe fiduciary duties of care and loyalty - they must be held to account. Unfortunately, for all too many companies the shareholders have little or no real voice in the nomination and election of their directors. As a result boards are too cozy with management and, not surprisingly, often fail to ask the hard questions that might expose practices that put the company at risk.
So, yeah. There is no plan to start capping the pay of executives at every company in America. Of course, that simple fact isn't stopping CNBC from hysterically misinforming their viewers:
See: that's just wrong. Schumer is not suggesting an extension of Feinberg's purview. Schumer is suggesting that applying his own legislation to the seven companies over which Feinberg holds sway, because of their debt to taxpayers, would be an additional prescriptive.
It seems to me that there was a time that the business news really had to work hard to get things right because so many people were depending on their reporting for the vital intelligence they needed to... you know, get rich. Now that the Wall Street Journal and CNBC mainly exist to cheer-lead for the financial sector's greatest stupidities and blithely misinform their customers, what can I say? Caveat lector!
Wall Street Journal And CNBC Get Schumer's 'Shareholder's Bill Of Rights' All Wrong [Wonk Room]
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