Give shareholders a say

Thursday, June 19, 2008 | 2:07 a.m.

It is common in the private sector to grant pay raises to employees based on performance. Productive workers who meet or exceed the goals set by the employer are far more likely to get raises than colleagues who deliver less than expected. It should be no different for the chief executives of publicly traded American corporations, but one would have to live in fantasyland to believe that is the case.

Proof came in the form of an Associated Press analysis that found that the 10 highest-paid executives last year collectively made more than $500 million, yet five of them ran companies that had lost significant amounts of money. General Motors Corp. posted a $39 billion loss in 2007 but top honcho Rick Wagoner pocketed $15.7 million, a 64 percent pay increase. KB Home lost nearly $930 million last year because of the struggling housing market and the subprime loan mess but Chief Executive Jeffrey Metzger collected a $6 million bonus as part of a $24.4 million payday because he exceeded certain objectives set by the company board.

Imagine how the shareholders must feel. Many are small-time investors who rely on stock earnings to finance retirement or a child’s education. Investors can take pride in ownership of a company and on occasion are even asked to vote their shares for important company business. But they are seldom asked to vote on executive pay packages. The time has come for that to change.

Both major presidential candidates support nonbinding shareholder votes on executive pay but we like Democrat Barack Obama’s idea better because he wants to make it a law passed by Congress. Making the votes advisory would give corporate boards an excellent negotiating tool to use with top company leaders who try to get far more money, stock options and other benefits than shareholders believe they deserve. Simply handing over the vault to an undeserving chief executive is no way to run a business.