Consider this a nice bookend to John Ziegler’s appearance yesterday on CNBC’s sister network MS-NBC. Contessa Brewer had a teary-eyed fit when Ziegler dared to criticize the network; this time, it’s the guest who throws a tantrum and walks off when the host challenges his strawman. As James Joyner remarked on Twitter, is this the man you want in charge of executive compensation? Hardly (via Michelle):
Frank whines about getting cut off, but he trotted out an old Obama strawman — he accused the host, Mark Haines, of wanting to do “nothing” about the economic crisis, which isn’t at all what Haines said. When Haines tried correcting the record, Franks played victim and whined his way off the stage.
Unfortunately, that ended the challenge to Frank’s push to legislate executive pay, which showed some promise. Haines noted that the shareholders of public corporations nowadays tend to be mutual funds and not “Mom and Pop” shareholders, but there’s a reason for that, and it’s a good one. Thanks to efforts by the Reagan administration to lower barriers to entry in the market through retirement funds, we have transformed in one-quarter century from a nation with a 15% investor class to a 70% investor class. These shareholders aggregated in mutuals for strength in numbers. At the same time, companies began tying compensation to stock performance, which pushed businesses to get more efficient and incentivized execs to improve their companies, where the standard salary+perqs packages had failed in the 1970s.
Did that lead to excess and bad long-term management? Yes, it did, although that has been far outweighed by a huge improvement in efficiency, productivity, and entrepeneurship. Shareholders didn’t complain because the short-term thinking boosted stocks and profits, but those days are over. The task of rebuilding will force companies to look to long-term health, and the shareholders that have taken huge losses in the last year will be much more likely to press for that kind of strategy, as the losses they took cannot be recovered in the short term. With or without government intervention, look for the market to correct the excesses and failures.