Fidelity, Vanguard Skate in Home Depot Pay Scandal

Congressman Barney Frank (D-MA), chairman of the House Financial Services Committee, wants to take steps to try to stop these absurd windfalls. It's about time.

What we don't want is a blizzard of new regulations and big government setting pay levels. His first proposal has a lot of merit. He simply wants to force companies to disclose executive pay more fully in advance, and to make sure shareholders get to vote on it. The problem right now is that although there is plenty of "disclosure," it's buried across pages and pages of legal jargon in the proxy statements. Frank could make sure that each proxy statement discloses the total amount, in clear English, that the top executives stand to make.

The other proposal being kicked around -- allowing shareholders to "claw back" excessive severance after the fact -- goes too far. There is the principle of contract involved. You can't hire someone for five years at a price of $210 million, wait until they've worked for you for five years, and then take the money back.

Memo to Congressman Frank: There is an easier way.

The one thing I have learned about mutual fund managers is that they absolutely loathe being embarrassed in public. They'd rather eat cardboard. Which is why if the congressman really wants to crack down on these pay deals, he should slap subpoenas on every single fund manager who controlled shares in Home Depot over the past six years and voted to approve Nardelli's pay.

He can throw in those who backed other outrageous pay deals -- like the $200 million that Hank McKinnell got when they kicked him out of Pfizer and the half a billion that Lee Raymond had in his pocket when he walked away from ExxonMobil.

Frank can start with the folks at Fidelity, probably the most powerful fund management company in America, and certainly one of the most powerful companies in his home state of Massachusetts. He should drag the managers and the fund trustees down to Washington, D.C., to explain themselves before the cameras.

And he should do it again, every year, until they learn to be more careful with their shareholders' money.

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