By Arun Kumar
Washington, Oct 25 (IANS) In the midst of a controversy over President Barack Obama’s ‘pay czar’ slashing executive salaries, a leading management guru says the best way to guard against corporate greed is to more fully empower shareholders to pick more courageous directors with “backbone”.

This is important for a larger impact, as the ‘pay czar’ is really a special master authorised by Congress for a very narrow jurisdiction - 25 top executives at each of the seven bailed out firms, Jeffrey Sonnenfeld, Senior Associate Dean Yale School of Management, told IANS in an e-mail interview.

Sonnenfeld, named by Business Week magazine one of the world’s “ten most influential business school professors”, would be discussing such issues at the Yale Indian CEO Leadership Summit with the likes of the Reliance Industries chief Mukesh Ambani who last week cut his own pay package by nearly two-thirds.

Also attending the Nov 6 summit in New Delhi would be K K Modi and Nandan Nilekani and many other great Indian enterprises along with the heads of Asian operations for American firms GE, ExxonMobile, Wal-mart, 3M, Cisco, Ford, Boeing, KKR, Blackstone among others.

“There is symbolic and moral codes of conduct and appropriateness modelled here but for truly larger impact, board of directors must be more courageous and have “backbone’ to say no to such unjustified greed as we have seen (among US corporates),” Sonnenfeld said.

Thus “the best way to do this is to more fully empower the voice of shareholders - the actual owners of the enterprise - with such vital mechanisms as the power to elect directors with simple majority votes,” he said.

But justifying the appointment of a ‘pay czar’ by Obama, Sonnenfeld said: “It is a good idea to have a “pay czar” only to provide for public monitoring, accountability, and fairness in compensating those firms who received extraordinary government assistance in the form of tax payer bailouts, especially when, through bad management, these firms were forced to surrender up to 80 percent of their ownership to the taxpayers!”

“It is not a welcome intrusion by corporate management, but one which was necessary given the poor judgment of top management allowing reckless risk to destroy the independent vitality of their enterprises, while paying themselves billions of dollars in compensation unjustified by the terrible performance,” he said.

But Sonnenfeld cautioned the ‘pay czar’ not to “speak to the appropriate levels of compensation for healthy, independent private enterprise - no matter how tempting it may be to address often apparently wrong-headed decisions of other boards.”

“The corporate governance mechanisms of those enterprises should not be intruded upon if the business has not taken on government assistance nor worked in an unlawful manner,” the Yale professor said.

Companies, he said, should be allowed to make wrong strategic, compensation, product, staffing, production, and other such decisions without micromanagement by the public sector.

In Sonnenfeld’s opinion Obama’s pay czar Kenneth Feinberg, who last week slashed executive salaries of 136 top executives at seven biggest bailed-out companies, “has done extremely well in his role.

“He approaches status as a national treasure for this and other past dedicated public service,” the professor said noting Feinberg had “adjudicated the funds accumulated for 9/11 victims families for no compensation himself.”

(Arun Kumar can be contacted at arun.kumar@ians.in)