Legal Experts Split Over Shareholder Pay Say

One share, one vote? Not exactly: the fate of millions of shares and the rights of shareholders may be up for grabs, as the U.S. House Financial Services Committee is considering a bill that would give investors final say over CEO compensation. Two experts debated the wisdom of such a bill, on "Morning Call."

Mary Ann Jorgenson, a corporate governance attorney and partner at Squire, Sanders & Dempsey, said the idea of giving shareholders the power to set executive benefits "sounds good" --but "won't work."

She explained to CNBC's Mark Haines that most investors own stock through mutual funds and pension plans -- and said "it's not like Mr. and Mrs. Goodbody are going to vote on this." And the attorney doubted whether mutual fund managers realistically have enough time and background data to "make an informed vote on 6,000 company compensation plans." Her soluition: letting "hardworking" compensation committees make the call.

But Mercer Bullard disagreed with Jorgenson. Bullard, a professor at the University of Mississippi's law school, asked rhetorically: if a mutual fund had no time "to think hard" about executive compensation, "did they have time to consider investing in the company in the first place?" Bullard noted three outsanding problems with letting firms' own internal organs regulate C-level rewards:

- A "clear conflict," as CEOs often weild "undue influence" over boards;
- Delaware corporate law, which has "basically abdicated" its role in the matter (he noted the Michael Ovitz case); and
- CEO compensation as a symbol: Bullard underscored that a company's ethics and perspective trickle down from "the top of the pyramid."

Factbook: In February 2007, insurer Aflac became the first U.S. company to allow shareholders to vote on executive compensation.