Jesse Fried

An op-ed by Charles Fried and Laurence H. Tribe. Although the two of us frequently approach legal questions from different perspectives, and just as often disagree about the best answers to those questions, we share a respect for our Constitution and a reverence for the judicial process. That’s why, in spite of our disagreements, we agree that Harvard Law School professor David Barron is exceptionally well-qualified to hold a seat on the US Court of Appeals for the First Circuit and that the Senate should promptly confirm him.

… 4. I’ll cash out at the first opportunity. Since the accounting scandals of the early 2000s, corporate reformers have argued that CEOs should be required to own company stock and to keep it throughout their tenure — ensuring that the CEO’s financial interests are aligned with those of the company’s shareholders. But although 95% of the top 250 U.S. public firms have adopted these policies, they’ve been “extremely ineffectual” in requiring CEOs to hold onto their own firm’s stock, according to a paper accepted for publication in the Indiana Law Journal by Nitzan Shilon [SJD `14], a research fellow at Harvard Law School… 8. Activist shareholders pull my strings. CEOs at publicly traded companies are supposed to listen to their shareholders — but some investors speak louder than others. Recent years have brought a spike in “activist” investing by hedge-fund managers and other big-money players whose modus operandi is to buy a large share of a company, and then demand changes in strategy and management. “Acting in the shadow of shareholder activism, companies are also reviewing their boards and removing people who aren’t equipped to be there,” says Jesse Fried, a professor at Harvard Law School who studies executive compensation and corporate governance. In theory, this helps companies make better decisions, he adds.

The 848-page Dodd-Frank Wall Street Reform and Consumer Protection Act dedicates 149 words to framing a new disclosure about “pay versus performance” at public companies. Boards and management must deliver “a clear description” to shareholders of “the relationship between executive compensation actually paid and the financial performance of the issuer,” the law states…“If you’re stripping out pension valuations and other things, you’re cooking the books,” says Harvard Law School professor Jesse Fried, co-author of Pay without Performance: the Unfulfilled Promise of Executive Compensation.