ALL
POV: What Is Capitalism?
by Ayn Rand | November-December 1965
In Pursuit of Wealth: The Moral Case for Finance
by Yaron Brook | September 30, 2017
Inequality Doesn't Matter If We’re All Paid According to the Value We Create
by Don Watkins | October 18, 2016
Who Cares about Inequality?
by Don Watkins | April 28, 2016
Equal Is Unfair: America’s Misguided Fight Against Income Inequality
by Don Watkins | April 19, 2016
Economic Inequality Complaints Are Just A Cover For Anti-Rich Prejudice
by Don Watkins | April 14, 2016
Equality of Opportunity Doesn’t Exist in America — and That’s a Good Thing
by Don Watkins | April 06, 2016
Inherit The Wind . . . And Not Much Else
by Don Watkins | April 05, 2016
Equal is Unfair: America’s Misguided Fight Against Income Inequality
by Don Watkins | October 20, 2015
Religion in America
by The Editors | December 05, 2014
Religion vs. Freedom
by Onkar Ghate | December 03, 2014
Debate: “Inequality: Should We Care?”
by Yaron Brook | May 08, 2014
Economic Inequality: Who Cares?
by The Editors | March 25, 2014
Our Poverty Problem?
by Don Watkins | March 11, 2014
Is Inequality Fair?
by Yaron Brook | March 05, 2014
Government tries to do too much: Opposing view
by Don Watkins | January 26, 2014
“You didn’t build that,” conservative style
by Steve Simpson | December 09, 2013
Why Do 1.4 Million Americans Work At Walmart, With Many More Trying To?
by Doug Altner | November 27, 2013
Atlas Shrugged Is A Book About Pride In One’s Work, And The Success That Results
by Steve Simpson | November 08, 2013
Bernie Madoff, Steve Jobs, and Wall Street Greed
by Don Watkins | September 26, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Be Born Poor Doesn’t Mean You’ll Always Be Poor
by Yaron Brook | April 12, 2013
We Should Be Embarrassed by the Sequester Debate
by Yaron Brook | March 20, 2013
“Give Back” Is One of the World's Most Impoverishing Commands
by Yaron Brook | March 12, 2013
Capitalism in No Way Created Poverty, It Inherited It
by Yaron Brook | February 25, 2013
3 crucial lessons Ayn Rand can teach us today
by Yaron Brook | February 02, 2013
Capitalism without Guilt
by Yaron Brook | January 21, 2013
President Obama Duels With Ayn Rand Over What Makes America Great
by Don Watkins | October 29, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
The Virtue of Employee Layoffs
by Yaron Brook | September 06, 2012
Ayn Rand’s Atlas Shrugged: A Paean to American Liberty
by Don Watkins | August 17, 2012
President Obama vs. My Grandfather
by Don Watkins | July 30, 2012
The Dog-Eat-Dog Welfare State Is Lose-Lose
by Don Watkins | July 12, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
Private Equity Firms Want Acquisitions To Profit, Not Fold
by Doug Altner | June 05, 2012
Opposing view: Celebrate private equity
by Don Watkins | May 29, 2012
The “On Your Own” Economy
by Don Watkins | March 09, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
Happy Birthday, Ayn Rand — Why Are You Still So Misunderstood?
by Don Watkins | February 02, 2012
America Before The Entitlement State
by Don Watkins | November 18, 2011
How Did Ayn Rand’s Atlas Shrugged Predict an America Spinning Out of Control?
by Onkar Ghate | October 31, 2011
What We Owe Steve Jobs
by Don Watkins | October 06, 2011
What’s Missing From The Budget Debate
by Don Watkins | July 12, 2011
Does America Need Ayn Rand or Jesus?
by Onkar Ghate | June 29, 2011
When It Comes to Wealth Creation, There Is No Pie
by Yaron Brook | June 14, 2011
It’s Time To Kill The “Robin Hood” Myth
by Yaron Brook | May 06, 2011
Using Ayn Rand's Values to Create Competitive Advantage in Business
by John Allison | April 04, 2011
In Defense of Finance
by Yaron Brook | February 15, 2011
The Tea Party Will Fail — Unless it Fully Embraces Individualism as a Moral Ideal
by Tom Bowden | January 21, 2011
How About Tax Reparations for the Rich?
by Don Watkins | January 18, 2011
The Guilt Pledge
by Don Watkins | September 22, 2010
How To Succeed In Business: Really Try
by Don Watkins | September 13, 2010
The U.S. Anti-Business Epidemic
by Don Watkins | August 17, 2010
Atlas Shrugged’s Timeless Moral: Profit-Making Is Virtue, Not Vice
by Yaron Brook | July 20, 2010
Capitalism: Who Needs It — Ayn Rand and the American System
by Yaron Brook | June 09, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Commercialism Only Adds to Joy of the Holidays
by Onkar Ghate | December 18, 2009
Why is Ayn Rand Still Relevant: Atlas Shrugged and Today’s World
by Yaron Brook | August 10, 2009
The Corrupt Critics of CEO Pay
by Yaron Brook | May 2009
America’s Unfree Market
by Yaron Brook | May 2009
Energy at the Speed of Thought: The Original Alternative Energy Market
by Alex Epstein | Summer 2009
Is Rand Relevant?
by Yaron Brook | March 14, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
Vindicating Capitalism: The Real History of the Standard Oil Company
by Alex Epstein | Summer 2008
The Right Vision Of Health Care
by Yaron Brook | January 08, 2008
Deep-Six the Law of the Sea
by Tom Bowden | November 20, 2007
The Influence of Atlas Shrugged
by Yaron Brook | October 09, 2007
The Morality of Moneylending: A Short History
by Yaron Brook | Fall 2007
Say “No Way!” to “Say on Pay”
by Yaron Brook | May 22, 2007
Atlas Shrugged — America's Second Declaration of Independence
by Onkar Ghate | March 01, 2007
Pay Is Company’s Prerogative
by Yaron Brook | January 08, 2007
Religion and Morality
by Onkar Ghate | October 18, 2006
Net Neutrality vs. Internet Freedom
by Alex Epstein | August 16, 2006
Why Are CEOs Paid So Much?
by Elan Journo | May 11, 2006
To Outsource or to Stagnate?
by Onkar Ghate | August 01, 2004
Ayn Rand's Ideas — An Introduction
by Onkar Ghate | June 02, 2003
Capitalists vs. Crooks
by Elan Journo | July 22, 2002
Forgotten Heroes of 9/11
by Onkar Ghate | May 17, 2002
Religion vs. America
by Leonard Peikoff | 1986
The Sanction of the Victims
by Ayn Rand | November 21, 1981
Egalitarianism and Inflation
by Ayn Rand | 1974
The Moratorium on Brains
by Ayn Rand | November 14, 1971
What Is Capitalism?
by Ayn Rand | November 19, 1967
Is Atlas Shrugging?
by Ayn Rand | April 19, 1964
The Fascist New Frontier
by Ayn Rand | December 16, 1962
America’s Persecuted Minority: Big Business
by Ayn Rand | December 17, 1961
The “New Intellectual”
by Ayn Rand | May 15, 1961
Capitalism vs. Communism
by Ayn Rand | 1961

MORE FROM THE BLOG:

Government And Business in Voice for Reason
Government & BusinessCapitalism

Say “No Way!” to “Say on Pay”

by Yaron Brook | May 22, 2007

The House of Representatives recently passed the “say on pay” bill proposed by Congressman Barney Frank. The bill forces all corporations to allow shareholders a non-binding vote on CEO compensation. The idea is to shame directors into lowering CEO pay, which the bill’s supporters claim is out of control.

Although the bill is touted as a means of protecting the interests of shareholders, what it actually represents is a usurpation of corporate control. It is therefore a violation of shareholders’ rights.

Those clamoring for this bill insist that legislation is necessary to give shareholders a “say on pay.” But shareholders already have a say on pay — i.e., a means of exercising control over corporate governance. If a shareholder is upset about CEO pay or any other management issue, he has three legitimate, free-market options: 1. “Vote with his dollars” by selling his shares; 2. Accumulate a controlling interest in the company (typically 51 percent) and impose a new board of directors; 3. Persuade a majority of shareholders to replace the board with people sympathetic to their concerns.

If enough shareholders really wanted a vote on CEO pay, they could demand a change to their company’s bylaws. But very few companies have adopted such changes, suggesting that most shareholders are not actually interested in this control. After all, one of the great benefits of the corporate structure is a clear division of labor: shareholders invest capital, but leave the business management to an elected board and its chosen executives. Rational shareholders do not want to micromanage public companies by participating in such decisions as setting CEO pay.

It is a minority of “activist” shareholders — together with antibusiness politicians — who are shrieking about “outrageous” CEO pay packages. And it is highly revealing that, instead of pursuing one of the above methods that respects everyone’s freedom, they are agitating for legislation — seeking to wield the power of government to force their views of corporate governance and CEO pay on the majority of shareholders.

What motivates these activists is not the wellbeing — i.e., the wealth — of fellow shareholders, but an antiprofit, anticapitalist social agenda. It is they who call for corporate “social responsibility” — the idea that executives and shareholders should sacrifice money-making for the sake of sundry “stakeholders.” This is incompatible with the purpose of business and with the responsibility of corporate leaders to maximize shareholder wealth.

Indeed, if these activists were truly concerned with the shareholder and the quality of boards of directors and CEOs that he can hire, they would be advocating for less government regulation not more. Regulations today prevent market forces from fully operating in corporate America.

For instance, the Williams Act restricts stock accumulation, and other regulations place strict constraints on board membership and hostile takeovers, all of which make ousting incompetent management more difficult. Sarbanes-Oxley, that incredible perversion of justice, has cost innocent businessmen billions of dollars in the name of fighting the misdeeds committed by others. This has made running an honest business more precarious and less enjoyable.

Anyone truly concerned about shareholders — and about the health of corporate America — should be campaigning for the repeal of these regulations.

But far from fighting government controls, shareholder “activists” fight to hand control over American corporations to government — or to organizations controlled indirectly by politicians, such as public pension plans. Indeed, this is already beginning, prompting many businesses to flee to the relative safety of private ownership — i.e., being owned and run by professionals — so that they can continue to maximize their wealth.

With this ever-increasing web of regulations, does anyone really believe that the government will stop at non-binding shareholder votes, that the next step won’t be the imposition of binding votes and, longer-term, government limits on CEO pay? Congressman Frank doesn’t. Frank — who has supported outright caps on CEO pay — has threatened that if “say on pay” does not sufficiently reduce CEO compensation relative to that of other employees, “then we will do something more.”

Don’t be fooled by those who say they just want to give shareholders a say. The real issue is who has the right to decide how a business is run: its owners or “activists” who have seized the power of governmental coercion?

About The Author

Yaron Brook

Chairman of the Board, Ayn Rand Institute