The wise Adam Smith figured out two centuries ago why boards of public companies would let CEOs haul away truckloads of money that ought to belong to the shareholders.
"The directors of such companies, being the managers of other people's money than their own," the Scottish philosopher said, do not "watch over it with the same anxious vigilance" that a direct owner would bring to bear.
The "say on pay" legislation in Congress would give the owners of corporate America a little more power and a little more vigilance over what are, after all, their companies.
They would get to vote up or down on executive pay every year. The votes would be "advisory" only. Directors wouldn't have to change the pay, but they would hear about it in a public and embarrassing way if the shareholders they work for objected.
You would think folks who say they support free markets and like to quote Adam Smith would be in favor. But Republicans seem to hate "say on pay."
Alabama Republican Rep. Spencer Bachus compared the legislation to Democratic proposals for health-care reform and regulating carbon emissions, calling all three "sweeping power grabs into the private sector under the guise of government riding to the rescue."
The bill would set "unprecedented standards" for shareholder votes and give government broad, new "authority over the free enterprise system," says Texas Republican Rep. Pete Sessions.
But shareholders are the free-enterprise system. They are the private sector. The property rights that come with a real estate deed, a car title or a share of stock are the foundation of a capitalist economy. Time was when conservatives would have favored strengthening these rights.
It may be that Republicans mainly oppose a piece of the "say on pay" bill, passed by the House this month, that would let Washington second-guess compensation at major banking companies. It may also be that they're against anything President Barack Obama is for.
But their opposition is likely to fail, and they have only to thank the CEOs whose water they're carrying.
After the worst year for the stock market since the 1930s, corporate America has definitively proven that "pay for performance" is fake.
Citigroup and Merrill Lynch managed to lose shareholders a combined $50 billion last year. But they still paid out nearly $9 billion in bonuses, according to information subpoenaed by New York Attorney General Andrew Cuomo. The bonuses were indirectly financed by taxpayer bailouts, without which many Citi execs wouldn't have even been employed.
