I had been asked to write an Op Ed for the IB Times, an on-line only newspaper with a fairly impressive circulation of about 4 million readers. Honestly, I had never heard of the publication until they reached out to me. But I have to say, I was impressed with what I saw. It even made me hopeful for the future of the on-line only newspaper format.

But that is neither here nor there. The matter at hand is the Op Ed piece.

The piece that I penned for them dealt with executive pay, and was loosely based on a blog post (see Revisiting Executive Pay) from several years ago. In the Op Ed (see Executive Pay: The Problem is Systemic) I argued that simple band-aid type solutions such as increasing the proportion of independent directors and allowing shareholders to vote on pay do not address the root cause of the problem. I wrote:

The issue of executive pay has resurfaced again in the wake of questionable AIG bonuses, and exorbitant compensation packages for banking executives. Pundits see the problem largely as a consequence of a lack of independence among boards of directors. They criticize compensation committees for being too cozy with top management – showering them with lavish pay, outsize option packages, and a host of other perquisites. The solution, they argue, is to increase the percentage of independent directors serving on the board, and to provide shareholders the right to vote on executive compensation.

I agree that boards ought to share some of the blame for a system that has seen executive compensation rise from about 30 times the average employee’s salary in the 1970’s to over 100 times the average employee’s salary today…But boards are not wholly to blame.

The reasons for the spectacular rise in executive compensation are complex. The problems are endemic to a market and institutional system which has radically changed over the last half century. Therefore, to arrive at an appropriate solution, we must start by asking ourselves some fundamental questions…

I’ll leave you with that teaser. To read the Op Ed in its entirety, please visit Executive Pay: The Problem is Systemic.

(Disclosure: I was not remunerated for having written the Op Ed, …or for that matter, to drive traffic to the IB Times or speak highly of the publication. I have no relationship with them other than their request for an Op Ed, and my agreement to write it.)

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