CFOZone.com - The Network of Corporate Finance

The preamble to the executive-pay-cap bill that’s coming down the pike proposes a shareholder “say on pay” and includes the following choice wording about its intentions: “To prevent perverse incentives in the compensation practices of financial institutions.”

“Perverse,” such a tangy word -- the dictionary definition includes “wicked or corrupt.” The bill (in raw form here) that passed out of the House Financial Services Committee (summarized in actual English here) this week contains some concessions: one that would exempt “smaller” companies – though it would leave it to the SEC to decide what “smaller” means; another that would limit pay restrictions to incentive-based arrangements.

The overall gist remains the same. Shareholders would still have their vote (even if it’s nonbinding, brave will be the compensation committee that ignores such a referendum). The populist groundswell is huge, as noted by -- among many others -- Lucian Bebchuk, the professor and co-author of the prescient (2004) “Pay without Performance: the Unfulfilled Promise of Executive Compensation,” who’s observed how most Americans don’t get too riled up about overpaid athletes and movie stars but that it’s different when it comes to bank execs.

Bebchuk nailed it here a month or so back: “What’s now producing the outcry over executive compensation is not the sheer numbers but the disconnect between pay and performance and the sense that executives have an undue influence on their own pay.”

Perverse, in other words. Wicked or corrupt.

I'm not exactly sure why the public doesn't care about mega pay for celebrities but does about pay for execs. When you think about it, there wasn't a whole heck of an outcry about execs until after the crisis hit, even though execs have been getting outrageous compensation for a long time now. And for years, it's been a mystery to me. Average wages flat or declining for most people, cost of housing, energy and so on increasing, but no real popular outcry about the let them eat cake crowd. I'd love to hear theories for that phenomenon.

"Cuomo: Banks Paid Big Bonuses as Profits Slid"

From the WSJ coupla minutes ago: Several of the banks hit the hardest by the economic downturn and those that got the most money in government aid nonetheless handed out huge bonuses to employees last year, according to New York Attorney General Andrew Cuomo

I think Americans don't care about huge salaries and bonuses as long as it's not their tax dollars that are paying the bills. Which is probably why they don't care about celebrities' paychecks either because they only contribute to them is they chose to (I guess by going to see movies or concerts for instance).

Movie stars don't get slammed for their excessive salaries because a) they're a heck of lot better looking then most CEOs, and 2) we like popcorn.

Not totally sure, though, that I agree with the notion that some stars get big bucks because they're box office gold. That may have been true when Mickey Rooney was filling up the Strand, but these days, folks tend to go to movies based on reviews. And there's a lot more dissemination of those reviews, thanks to the Internet.

If only there was as much online chatter about the performance of a CEO as there is about the performance of a Johnny Depp. That would light a fire under a few keisters.

I don't speak French, but what could "P" stand for in Sarkozy-land? Marine?

Interesting that France has decided to try to become a leader on this, and that they're focusing on bank traders. As one source in the WSJ says, this is unlikely to go very far in the U.S. and the U.S. Here, I think we view traders more like movie stars, certainly more so than boring old CEOs.