Reinhardt: Whom do corporate boards represent?

Uwe Reinhardt posted a nice summary of Bebchuk and Fried’s “Pay Without Performance,” which assesses the reasons why executive compensation differs from “optimal contracting.” Bebchuk and Fried argue that CEOs basically set their own pay, subject to an “outrage constraint,” which Reinhardt notes has become stricter with the downturn. (Witness execs of bailed-out companies being excoriated for consuming their usual perks.) I’d like to see more analysis of when and why public outrage has bite. I would think that shareholder protest votes — and the threat of takeover or sell-off that lies behind them — would be a part of the story.