Post Date: September 8, 2006

Professor Lucian Bebchuk testified before the Senate Finance Committee on Wednesday, September 6, during a hearing on executive compensation.

The Committee is examining a provision in the U.S. tax code that seeks to limit the tax deduction firms can claim for non-performance compensation paid to top executives to $1 million per year. The provision, many say, has not been successful in inducing firms to curtail compensation not linked to performance.

“Retirement plans of top executives have provided them with large amounts of non-performance compensation that fell below investors’ radar screens and gotten around the limitations established by Section 162(m),” explained Bebchuk in his testimony and written statement.

According to the professor, “The problems of executive pay can be fully addressed only by strengthening shareholder rights.”

Bebchuk’s testimony built on his book with Jesse Fried, Pay without Performance: The Unfulfilled Promise of Executive Compensation, as well as on a subsequent empirical study on executive pensions, co-authored with Robert Jackson.