Supreme Court to Hear Case on Executive Pay [View All]

Source: NY Times

Last summer, Richard A. Posner, a federal appeals court judge, issued a surprising and prescient dissent. Executive pay is out of control, he said, and the marketplace cannot be trusted to rein it in.
Judge Posner is a conservative with libertarian leanings, and he is a leader of the law and economics movement associated with the University of Chicago. He often relies on economic analysis in his judicial decisions, and he believes that many questions are best sorted out by the marketplace.
But corporate America has insulated pay decisions from market discipline, Judge Posner wrote. "Executive compensation in large publicly traded firms often is excessive," he added, "because of the feeble incentives of boards of directors to police compensation."
The Supreme Court will hear the case this fall, as anger over huge bonuses paid to the executives of failing firms continues to grow. The case, Jones v. Harris Associates, may turn out to be the court's first significant statement on the corporate culture that helped lead to the Great Recession.


Read more: http://www.nytimes.com/2009/08/18/us/18bar.html