Do we need all the laws we have?
This is not going to be a political 'rant' . . . . . but a question based on some research conducted for a class I recently attended as a guest lecturer. I was invited by Kathleen Lafferty, Director of HR for Hanley Wood Marketing and adjunct faculty member in HR at Metro State University. She teaches a class on Human Resources Management and has asked me to be a guest in her class for the past three semesters. My topics during each visit - (1) Executive Compensation and (2) Retained and Contingent Search.
I am not a compensation expert, but . . . . .Daily, my colleagues and I ask candidates to tell us their salary level (base, bonus, etc.). They tell us; we keep the data - it is great information for our clients on true market pricing for their open positions. That said, legislation on executive compensation is not where I spend my time. Because of this class, our head of research finds the latest/greatest out there on the topic.
Say on PayIn January of this year, the SEC voted to adopt final rules giving shareholders of publicly traded companies the right to weigh in on executive compensation through nonbinding advisory votes.
- Nonbinding? Let me express my confusion here . . . . . if I buy stock, I approve; if I do not buy stock OR sell the stock that I own, I disapprove.
Dodd-FrankAgain, maybe it is just me, but this law states the obvious. If the financial statements that I was paid under are found to be inaccurate, the bonus I received has to be adjusted to reflect the corrected version. It is called a "claw back" - reflecting the requirement that the company take back the overpayment. This law is called the Wall Street Reform and Consumer Protection Act of 2010. My name for it - pay accurately both short and long-term.
I know there is more out there . . . . .I appreciate the executive compensation experts that work hard to assure that the top people in any company are paid for the impact of their work. The laws, however, seem to be the reactive outgrowth of the stories of executives who are terminated and then receive millions for the lack-of-results achieved. My solution to these situations? Don't invest in these companies!
If I am ever in charge of the SEC or CongressMy rules would come from one of the best books I have ever read, All I Really Need To Know I Learned In Kindergarten by Robert Fulghum. Among my favorite rules from this book, which should be required reading in any business course, are:
- Play fair.
- Clean up your own mess.
- Don't take things that aren't yours.