Social critics have long pointed out that corporate boards routinely sign blank checks that award lush remuneration to top executives of their companies. But not since the Great Depression have shareholders been able to successfully challenge those munificent pay packages. Courts, rather, have regularly deferred to what they call the business judgment of directors and turned away shareholder claims that such exorbitant and unearned recompense constitutes a waste of corporate assets. Things, however, may be changing.
Business journalists, bloggers and academic commentators are now identifying excessive compensation as the No. 1 problem in corporate governance, using words like “looting” and “theft” to describe those rich rewards. The outrageous nature of this remuneration has become particularly shocking when compared to the pay of most working Americans. While private-sector wages rose only by 2% in 2010 and unemployment remained dismally high, the median compensation for chief executive officers at Standard & Poor’s 500 index companies was up by 18% from 2009 to an average of $12 million.
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