Judge Richard A. Posner, a federal appeals court judge, has refuted executive compensation since last summer. He wrote: “Executive compensation in large publicly traded firms often is excessive, because of the feeble incentives of boards of directors to police compensation,” reports the New York Times. The Supreme Court will hear the case this fall, as public scrutiny grows regarding excessive bonuses paid out to corporate executives. The case, Jones v. Harris Associates, may be the first step for the court’s approach to limiting excessive payouts. Enormous fees mutual funds paid to investment advisers ignited the backlash by the courts. The three-judge panel in the United States Court of Appeals for the Seventh Circuit, in Chicago, threw out the lawsuit brought by the investors in three Oakmark mutual funds who said the funds have overpaid their investment adviser, Harris Associates. Back in 2003, Warren Buffett wrote in a letter to shareholders: “Year after year, at literally thousands of funds, directors had routinely rehired the incumbent management company, however pathetic its performance had been. Just as routinely, the directors had mindlessly approved fees that in many cases far exceeded those that could have been negotiated.”
Supreme Court to Hear Case on Executive Pay
The Supreme Court is expected to weigh in on executive bonuses, possibly resulting in stronger restrictions on excessive pay practices.
August 17, 2009