Sarbanes-Oxley was supposed to hold the top executives' feet to the fire. By forcing them to sign off on financial statements and holding the threat of jail time over them, the cliché "new era of accountability" took on new meaning. At first blush, it might seem that the law has achieved much on Wall Street. A number of CEOs have been disgraced and forced to resign. But they weren't fired! Which means they walked off with unfathomable riches.
Portfolio argues that it is as hard as ever to actually fire a CEO. Many new-hire CEOs responded to Sarbox by demanding employment contracts that spell out the conditions under which they can be terminated. "For all the talk of CEO's taking responsibility and earning pay based on their performance, the typical corporate leader now has more job security than an East German factory manager during the Soviet era. However poorly a company performs, firing its C.E.O. is virtually impossible...."
So they can beg that a CEO step down, and he'll likely agree. But that triggers some amazing parachutes. We should all be forced to resign under such conditions. The number of CEOs that have employment contracts has soared over the past several years. Portfolio notes that in many cases, such contracts were approved with little review. Hopefully, that will change.
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