TheCorporateCounsel.net

Here is a “must read” article and free video from Friday’s Financial Times: “Jeffrey Immelt, chairman and chief executive of General Electric, has urged company leaders in the US to ensure their pay does not dramatically outstrip that of their senior managers and to limit the influence of compensation consultants.

Mr. Immelt’s intervention in the debate over executive pay – featured in a video interview with the Financial Times – underlines the growing importance of the issue for shareholders and executives of America’s largest companies. “These are public jobs, there were so many abuses in the late 90s and in the early part of this century and that created concerns,” he said.

Mr. Immelt argued that chief executives should not have multi-year contracts, which could lead to large pay-offs if they were dismissed, and the bulk of their compensation should be linked to performance. Yesterday, the FT revealed that a group of leading public pension funds had urged the top 25 companies in the US, including GE, to ban pay consultants from advising the board and working on other company matters.

Mr. Immelt, who took over the leadership of the industrial conglomerate five years ago from Jack Welch, did not mention the letter but said the board should be the final judge of executive pay. “I think it should be based on the good judgment of the compensation committees, the board and the CEO,” he said. “I don’t think consultants should be involved.”

In a separate conversation with the FT, he said that, to motivate staff and avoid excesses, chief executives’ pay should remain within a small multiple of the pay of their 25 most senior managers. “The key relationship is the one between the CEO and the top 25 managers in the company because that is the key team. Should the CEO make five times, three times or twice what this group make? That is debatable, but 20 times is lunacy,” he said. Mr. Immelt, who last year received $3.2m in salary and no cash bonus, added that his pay was within the 2-3 times range.”

SEC Gains Another Deputy General Counsel

On Friday, the SEC announced that Alexander Cohen has agreed to leave Latham & Watkins’ Hong Kong Office (and Co-Chair of the firm’s Corporate Finance Practice Group) to serve as the agency’s Deputy General Counsel for Legal Policy and Administrative Practice. Alexander joins Andrew Vollmer, who is Deputy General Counsel for Litigation and Adjudication. Looks like SEC GC Brian Cartwright is “getting the band back together” by luring a colleague from his former firm…

What Do Tomorrow’s Elections Hold in Store for Sarbanes-Oxley Reform?

With President Bush and Vice President Cheney making comments about Sarbanes-Oxley reform during the past few weeks, it is evident that the debate over reform is reaching new levels. As described in detail in The D & O Diary, some of the issues to be tackled by the recently-formed Paulson Committee are truly far-reaching, such as the elimination of the use of Rule 10b-5 in private litigation!

This article from Saturday’s WSJ gives us an idea what Congressman Barney Frank (who is the ranking Democrat on the House Financial Services Committee and slated to chair that committee if the Democrats win the House on Tuesday). In the article, Rep. Frank “says he has no intention of reopening the landmark Sarbanes-Oxley corporate-accountability law, but would be willing to let regulatory agencies adjust their rules in light of business criticism that the law is being applied too stringently.”

And there has been plenty of other “reform/no-reform” rhetoric lately, such as this recent op-ed in the WSJ by Senator Charles Schumer and NYC Mayor Michael Bloomberg about American competitiveness and regulatory burden; Senator Schumer and Mayor Bloomberg noted four themes that have emerged so far from a study they commissioned from McKinsey & Company. Some of the themes echo those coming from others, including the Paulson Committee.

Personal note: With the page scandal festering as a campaign issue, I am compelled to note that I served as an intern on the Hill when I was in high school in the ’70s (I moved from Chicago to Bethesda in 10th grade). Complete with long hair, braces and platform shoes – and no untoward experiences. I was among the last of the interns as the program was soon abolished, leaving the pages as the sole body of underage staffers.

The experience was grand; I worked for the late Paul Simon from southern Illinois, who was in the House at the time before he became a Senator. Talk about an ethical guy; he was the epitome of what every politician should aspire to be…