Obama’s Schechter Poultry?
Over at the Wall Street Journal Deal Journal Blog, Michael Corkery speculates how federal law limiting private corporation executive compensation may be unconstitutional.
The issue is whether the amount and form of consideration a corporation, through its board, pays its employees, including executives, is a subject sufficiently affecting interstate commerce to authorize Congress and the President to regulate under the commerce clause.
The activities of large corporations and trading in their securities involve interstate commerce. So there’s little doubt that federal securities laws or various other laws regulating related activities pass muster.
But employee pay, particularly highest-paid executives? That is a matter concerning the internal affairs of the corporation. It implicates that conflict of law principle, which enjoys a respectable pedigree, including in constitutional law.
Obama’s proposals to cap pay for various companies would apply whether or not the federal government has invested funds in them, using debt or equity. The proposals may not be unconstitutional.
But they differ from securities law disclosure requirements and even Sarbanes-Oxley Act provisions about board independence and board supervision of auditors. Those creep into internal affairs yet the underlying accounting issues addressed involve capital allocation issues whose affect on interstate commerce is more clear cut than what to pay people.