Supreme Court Justice to Review Executive Compensation

museum.jpgChief Justice Roberts will be ruling on the issue of excessive corporate compensation.

Wearing his non-judicial hat, that is.

The overpaid executive is Lawrence Small, the Smithsonian Institution’s Secretary. His pay: $915,698, which included $90,000 in perks like a “private jet, hotel rooms, use of a private car service, catered meals . . . and a trip by his wife to Cambodia”. According to the Times’ article on the topic

“[T]he Smithsonian spokeswoman . . . said Mr. Small would wait to comment until the results of an independent review committee that Roger W. Sant, chairman of the executive committee of the Smithsonian’s board, announced Monday.

Mr. Sant, the founder of the AES Corporation in Arlington, Va., and a stout defender of Mr. Small, said the committee, to be led by Charles A. Bowsher, a former comptroller general, would review the board’s actions and Mr. Small’s expenses and report back in 60 days.

Other regents, who include Chief Justice John G. Roberts Jr. and Vice President Dick Cheney, have not commented on the compensation issue. In a March 7 response to a letter from Mr. Grassley, Mr. Cheney’s chief of staff, David S. Addington, said the Smithsonian was ‘an uncommon type of organization’ and referred the senator’s queries about its governance to the Smithsonian’s inspector general and general counsel.”

I could imagine quite a few bad stories about Small’s compensation, starting with Board capture, and ending with the lack of market discipline for a non-profit. But it seems unwise to prejudge the issue – the article, unfortunately, does not provide comparables, and I recall a recent Times story about the Met director’s high salary too. Reporters: jealous, much?

In any event, the governance of non-profits is an interesting subject, and one that Supreme Court Justices probably don’t get to think about much in their day jobs. Indeed, they don’t get to think much about ordinary corporate law either, although given SOX, the Court may have to confront such issues in the near future. You have to wonder whether the Chief’s experience with respect to the Smithsonian will make him more, or less, sympathetic to the claims of managers that they were exercising due care. In any event, the story bears watching.

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