Watchdog Blog

Gilbert Cranberg: Clawback Time

Posted at 2:04 pm, February 26th, 2009
Gilbert Cranberg Mug

The New York Times devoted a massive chunk of its Sunday Feb. 22 business section – 142 column inches by my count – to the hundreds of millions of dollars paid to executives of seven financial institutions despite their dismal management records. The question explored by the Times was whether compensation supposedly for performance should be “clawed back” (returned) to stockholders when the performance is proved to be sub-par.

The compensation in question – cash, stock awards and bonuses – didn’t just magically fall into the laps of executives. It was awarded by living, breathing human beings who served on compensation committees and boards of directors. In the lengthy Times takeout, they are virtually invisible. Only a single compensation committee chairman was identified by name in the Times piece. Nor did the Times report who voted for the awards in question, whether there were any dissents and how directors explained their votes.

So what else is new? In decades of conducting interviews with hundreds of people on all sorts of issues, my attempts to gather information from corporate directors, including for a book on publicly traded newspaper companies, were by far the most frustrating and fruitless. It was difficult even to reach them. I had much greater success contacting and obtaining information from members of the U.S. Supreme Court, a notoriously secretive bunch, than in dealing with directors. My impression is that corporate directors regard journalists as pests to be avoided at all costs.

The impression was confirmed when I questioned a source knowledgeable about the pitfalls of being a corporate director. I was told that these are potentially “high liability” positions and that directors rightly believe they have everything to lose by talking to journalists.

That was before the bailout era, which ought to create a whole new ballgame. If government props up a private business, the public, and its proxy, the press, ought to have a right of access to the way that business operates, including the deliberations of boards of directors.

If there are legitimate liability questions, let them be attended to. But deliberately making directors remote and inaccessible to the press ought not to be an option when the public foots the bill. And speaking of clawbacks, it makes sense to claw back some of that very generous pay of directors responsible for the undeserved obscene paydays for executives.

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