Michelle Leder of Footnoted.org has a rather silly take on executive compensation over at Slate. Leder notes that companies are increasingly using non-performance-based bonuses to compensate top executives and speculates that this trend is a response to Sarbanes-Oxley's ban on executive loans. Why do I call it silly? Several reasons:
- Leder implies that there is something inherently wrong about doing an end-run around a legal prohibition. To which I reply: Since when? If the law prohibits me from doing something one way, but allows me to do it another, why shouldn't I do so? There is no moral or legal obligation for me to try to divine the spirit of the law - especially a law like SOX that was rushed into the books so that Congress could create the appearance of concern and action.
- Leder says: "these new payoffs are a tribute to the enduring creativity of American corporate executives. No matter how the law changes, they still manage to find a way to overpay themselves." But she has no evidence - none, nada, zilch - that the executives in question were overpaid. Indeed, while she rolls out the ubiquitous Lucian Bebchuk (the Harvard law prof who wrote Pay Without Performance and never met an executive pay package he didn't think couldn't be explained as an exercise of managerial power), even Lucian contents himself with suggesting that these bonuses "may or may not be justified."
- Her claim that non-performance-based bonuses are a substitute for the banned loans is supported by reference to one - that's right 1!- company's SEC filings.
Close only counts in horseshoes and hand grenades, but this column doesn't even come close. It's a waste of pixels (brought to you by the same folks who are doing such a good job with the Bushism of the Day).
