Delaware Corporate Governance Blog

Conference Board Releases Report on Executive Compensation

On September 21, the Conference Board released a timely report entitled "The Conference Board Task Force on Executive Compensation".  The Report offers a private sector solution to the issue of executive compensation, and contains five guiding principles for setting executive compensation designed to restore credibility with shareholders and other stakeholders.

The Report may be found here:

The Conference Board's Report on Executive Compensation

The principles have been endorsed by several major corporations, but are these recommendations too little, too late to forestall action by Washington DC?

Federal Reserve Proposes Plan to Regulate Pay

Bankers Face Sweeping Curbs on Pay

The Federal Reserve's signals its intention to propose rules governing compensations practices for all banks, not just TARP recipients or those receiving extraordinary assistance.   Presumably using its safety and soundness authority, the proposals are likely to be controversial.  On the one hand, the Fed runs the risk of proposing rules that are too vague or high-level. On the other, the rules could be too prescriptive, and be an unprecedented interference with the pay practices of American businesses.  Either way, there will be ample fodder for criticism.

Perhaps the main concern with rules of this type, and indeed the legislation pending in the Congress, is the issue of state versus federal primacy in corporate governance.

"Anytime we have a third party usurping the authority of the [corporation's] board is problematic for us," said Charles Elson, Director Weinberg Center for Corporate Governance at the University of Delaware.

Elson said the best solution to compensation issues is strengthening the board of directors, in part through more viable elections, he said. "The solution has been there all along. We just haven't focused."

Is it time for banks to return to the fundamentals of sound governance principles?

Conference on Corporate Governance and Managing Firm Risk at the University of Delaware

The University of Delaware’s Weinberg Center for Corporate Governance will host a scholarly and applied conference on “Corporate Governance and Managing Firm Risk” on October 1 & 2, 2009,  at the Lerner College of Business and Economics in Newark,  Delaware.  The Conference, hosted by Professor Charles Elson of the University of Delaware and Professor April Klein of New York University will examine risk mitigation strategies and the causes of current financial crisis.  The Conference features a keynote address by Professor Robert Engle, Nobel Laureate and Professor of Finance at New York University’s Stern School of Business.