Pay-Fight Foes Blow Hot Air

The showdown planned for Thursday's Verizon(VZ Quote) annual shareholders meeting is a perfect example of good governance initiatives gone awry. Recently, partisans on opposite sides of corporate governance battles have been sending misdirected warning shots that pose no genuine threats to their actual targeted problems.

Each side has its own concerns -- shareholder activists distress over "excess executive compensation" for failing performance, and CEOs deal with frustration over the "short-termism" of investors that erodes longer-term investment plans that are needed to fortify great global enterprises.

Both are real market imperfections, but new reform efforts from each camp are missing a chance to influence each other, let alone correct the legitimate market problems both sides have identified.

Congress, heeding activist calls for "say over pay," recently passed HR 1257, idealistically mandating nonbinding shareholder advisory votes to limit excessive CEO compensation. Should even the House and Senate gain the votes to override a presidential veto, this mere advisory vote could be easily ignored by boards. In which case, its sponsor, Congressman Barney Frank, threatened to consider stronger legislation in the future.

Unfortunately, the cited cases of dramatic excess that triggered this concern, such as the outrageous severance packages of failed former CEOs such as Home Depot's(HD Quote) Robert Nardelli and Hewlett-Packard's(HPQ Quote) Carly Fiorina, were not the result of their annual salary reviews but of misguided upfront board negotiation when first hiring the boss. Such confidential recruitment negotiations would not be timed to match annual meetings.