Is the Lord of Regulation also the Lord of Compensation?

spitzernew10.jpgFollowing on the theme from this earlier post, this Kimberly Strassel/Wall Street Journal ($) op-ed examines the deposition testimony that is emanating from New York Attorney General Eliot Spitzer‘s lawsuit to recover alleged overcompensation paid by the New York Stock Exchange to former NYSE CEO Richard Grasso in connection with Mr. Grasso’s $140 million pay and retirement package. Ms. Strassel reports that the deposition testimony from the NYSE directors is contradicting Spitzer’s theory of the case, which is that the directors were given incomplete information regarding Grasso’s pay package and that they shirked their duty to evaluate the compensation arrangement fully. Noting Ms. Strassel’s piece, Larry Ribstein points out the transparent nature of the legal issue and the political purpose of the Grasso lawsuit, and provides the following “money” observation:

Spitzer is attempting to collect the rent on this litigation for his gubernatorial campaign. . . .
An imponderable here is where Spitzer gets off second-guessing a compensation decision. Shouldnít this be subject to the business judgment rule which, after all, gave the Disney board considerable coverage in the Ovitz affair? Well, the NYSE is a non-profit, and so gets Spitzerís solicitous stewardship under an arguably stricter rule. But one wonders why the business judgment rule wouldn’t apply here, since non-profits have to operate under the same conditions in hiring executives that the for-profits do, and courts aren’t any better able to review compensation in a non-profit.

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