Sunday, January 29, 2006

Do Not Disturb

They're here and they're huge! On Friday the SEC proposed new rules on compensation disclosure. The pdf was so big it froze my laptop, so I guess I'll have fun reading it.

As the previous post notes, the SEC's earnest attempts to make things better will no doubt have unintended consequences; let the betting begin on what the fallout will be. One thought, inspired by today's NY Times article on private equity, is that execs might simply pack up their golf clubs and relocate from Proxyland to Privateland. The article quotes a public company executive who says: "If I were paid what Steve Schwarzman [of Blackstone Group] would pay me if he owned my company and it was still public, someone would find a way to put me in jail." Too many hypotheticals in that sentence, but you get the guy's point: Privateland is a place where corporate officers can collect pharaoh-like riches without the nuisance of public exposure.

The Times piece also notes that private equity deals are getting bigger: "The conversation has turned to whether there will be a day when a $100 billion fund arrives, fundamentally changing the landscape between public and private businesses." If companies can meet their capital needs without turning to the public market, Proxyland could become a ghost town. And if Schwarzman and the other rulers of Privateland are as smart as everyone thinks they are, they will annex only quality companies with competent managers, leaving hapless public shareholders to throw their money at the losers who remain.