Alain Tanugi asked:


I think it was the Financier Leo J. Hindery Jr who once said: ‘I think there are people, including myself at certain times in my career, who because of their uniqueness warrant whatever the market will bear.’ But the questions beg HOW much is too much? and Should macroeconomic woes slow CEO pay growth?

I recently read in the Associated Press that even as the economy slowed down in America “CEO pay still chugged to yet more dizzying heights last year.’ The top 10 highest paid CEOs took home a total of more than $500 million, but half of those companies saw huge drops in profitability at their companies.

One of the most exasperating things to shareholders and the public is when a CEO receives millions or tens of millions of dollars of compensation regardless of performance. This practice goes fundamentally against the culture of rewarding on the basis of ability and merit that underpins the free market system. Recent examples include: Marriott International chief J Willard Marriott Jr – his 2007 pay was $44m, up 22%, just six percentage points lower than Marriott’s stock price drop or Stan O’Neal, Merrill Lynch’s former boss, left with $159m after losing $8 billion.

Shareholders and politicians are advocating bringing in rules for companies that would allow shareholders to vote on executive pay. Executives in Europe have home far less compensation than their American counterparts in the past. But with leadership compensation in Europe on the rise, these pay increases have citizens in European nations deeply unsettled. The public indignation on both sides of the Atlantic has contributed to a unique political debate over what to do about excessive executive pay. Executive pay figures in Asia are still not as widely accessible as in Europe and America and it is difficult to compare. A recent study conducted by the CFA Institute Centre for Financial Market Integrity said that reporting compensation of executives on an individual basis is the practice in the United States, Britain and Australia and is advocated by institutional investors worldwide. Prevailing regulations and practices in Hong Kong, Japan and Singapore however leave much to be desired.

Jean-Claude Juncker, president of the European Commission’s “Eurogroup” of finance ministers, recently called excessive pay a “social scourge” and demanded action. When L’Expansion, a French business magazine, calculated that pay for the country’s bosses went up 58% in 2007, the finance minister, Christine Lagarde, said it was “scandalous” and threatened regulation. Nicolas Sarkozy, president of France, and Horst Köhler, president of Germany, have also denounced high pay.

New legislation the Netherlands will see the law setting EU500,000 as the level of annual salary or severance payment at which extra taxes must be paid. Germany’s Social Democratic Party is calling for legislation to curb pay, though its partner in government, Angela Merkel’s Christian Democratic Union, has so far resisted. At the same time the European Commission is working on a response to the Eurogroup’s complaint.

Just how extreme IS executive pay in Europe? As European firms compete for global talent it certainly has risen substantially in the last 10 years. Foreign executives now run seven of the firms in France’s CAC 40 index and five of Germany’s DAX 30. American-style bonuses and long-term incentive plans are now commonplace.

However European firms still pay a fraction of what is paid to their counter parts in America. According to Hay Group, a management consultancy, the median European executive earns just 40% as much as his equivalent in America. It’s also notable that both American presidential candidates – John McCain and Barack Obama – have been making compensation a campaign issue.

There is an important difference though companies in Europe seem to be more determined than American ones to link compensation to performance. In America share grants are often not tied to performance, whereas European firms usually attach performance criteria to any share grants, typically depending on a comparison with a peer group. Dan Vasella, boss of Novartis, a Swiss pharmaceutical giant, and a favourite target of pay activists, earned SFr17m ($14m) in 2007, down 33% from 2006, because he missed his targets.

The extreme rise in European executive pay has sparked an intense debate in countries that have been characterised by a relatively strong sense of economic solidarity and impartiality in the past several decades. A July 2007 Financial Times/Harris public opinion poll found that over 60 percent of those surveyed in the UK, France, Italy, and Spain would like to see their government set caps on top business executive pay. In Germany, a 47 percent plurality supports pay caps.

In America, only 32 percent of the public supports an outright pay cap on executive earnings a recent poll shows. However 77 percent of Americans say corporate executives ‘earn too much.’ Some members of Congress have responded by introducing legislation to curb excessive pay through tax reform and giving shareholders the right to vote on pay packages.

I recently saw an interview with Sarah Anderson, who compiles the Executive Excess report on CEO pay on a yearly basis. She discusses some of the issues raised in this column in her interview and I recommend that you take some time to view it. (www.youtube.com/watch?v=X2lKfRFhG0M.)

From what I have read and heard in the last year signs point to a strong possibility that meaningful reforms to rein in excessive executive compensation could be a prospect, as many political leaders in Europe and the United States seem to be finally catching up to the public uproar. It has to be said though that compensation is a complex issue. Different circumstances and industries dictate different packages and even severance pay may be justified if a change of control is the end goal. One would hope though that politicians would reject laws about pay, which are too widespread to be useful. Strict legislation might well compel leaders away from listed companies and create compensation packages even more complex-and so much more difficult to monitor.

J.J. Jackson asked:

Liberals are gushing over, and President Obama is praising endlessly, Sonia Sotomayor. Repeatedly we are being barraged by the left with the personal story of one who could possibly be the first Hispanic woman on the Supreme Court. While such tales are always compelling, what is rather annoying is how any time you want to move beyond that superficial and sugary coating to examine her record the left quickly jumps right back to it. In an attempt to keep your attention away from a debate about who should be sitting on the highest court in the nation, people who do not want to examine anything of substance shout, “Look! Up In the sky!” Then they regale you with tales about how Sotomayor can stop a speeding bullet and leap tall buildings in a single bound.

President Obama claims that Sotomayor is smart. He even claims that she believes in the Constitution. But when one stops following his pointed finger into the sky where his nominee supposedly soars, we see that there is a plethora of evidence on the ground that contradicts the rhetoric. And for Sotomayor, that evidence littering the ground is damning and destroys any credibility those that call her smart and a defender of the Constitution may have.

There is one case in particular that sums this point up so succinctly and makes it impossible to ignore that Sonia Sotomayor is neither smart nor a believer in our Constitution. That case is Maloney vs. Cuomo in which Sotomayor signed onto an opinion that flies so far in the face of the facts that she should not be elected bubblegum sidewalk scraper much less nominated to the Supreme Court.

The case involved one James Maloney who was trying to assert his second amendment right to keep and bear arms but had been arrested for carrying a pair of nunchucks. The opinion with which Sotomayor agreed stated that the arrest was warranted because, now get this, the second amendment, “is a limitation only upon the power of Congress and the national government and not upon that of the state.”

Sotomayor did in this decision what liberals always do. She looked for something that she might be able to use to support her opinion and disregarded anything that actually contradicted it. Things like, oh I don’t know, say the 14th Amendment? You know that one don’t you? It says that, “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States,” which makes it clear that the states must, absolutely must, protect the same rights as the Constitution itself protects.

Sotomayor’s opinion does lead to some interesting potential conundrums however. If the second amendment only applies to the federal government as she suggests then what about other rights retained by the people and specifically called out in our Constitution?

Can the states now infringe upon my freedom of religion? How about my freedom of speech? What about my right to petition from redress? After all, unlike the second amendment, the first amendment specifically states that it is Congress that shall make no law regarding such.

Can the states now decide that they do not need a warrant to search my home even though the Constitution forbids such actions? Or can the states now decide to deprive me of a right to due process and a right to jury trial? What about these Constitutional protections written in a similar manner to the second amendment that Sonia Sotomayor believes stops at federal authority only?

Can I now be subjected to cruel and unusual punishment at the whim of the state? Can blacks now be placed back in shackles and shipped off to the plantations again simply for being black? After all, if what is written in the federal constitution only applies to the federal government what is to stop the states from doing any of these things?

Is my right to assemble in jeopardy now because my state legislature might decide that such is not a good idea? Can the state now quarter soldiers in my home without my permission? Can my papers and effects now be seized on the whim of the state alone?

Where does the lunacy of this opinion which Sotomayor agreed with end?

Of course the 14th Amendment renders all of these questions of mine moot. But Sotomayor either never read far enough into the Constitution to find it or is so wedded to ideology that she chose to ignore it. Can we afford to place someone who is obviously a wifty illiterate or dangerous ignoramus at best and a treacherous anti-American radical at worst to a court where such opinions of hers would become the norm and perhaps even the law? Will Americans stop looking to the sky for a super woman that does not exist long enough to ask serious questions and soundly reject her?