Barney Frank - American Hero

He's not getting a lot of news, but Congressman Barney Frank (D - MA) is quietly changing America.

Frank is sponsoring a bill to allow shareholders to vote on CEO pay. In the current system, all shareholders can do is vote for the board of directors. But they can only replace a small fraction of the board every year. That means, if a CEO is vastly overpaid, there's basically nothing that the shareholders - the owners of the company - can do about it.

This is clearly a market failure, caused by the government's failure to protect shareholder property rights. Or, as Frank puts it:

I do not understand those who argue that the people who make up our stock markets are collectively very wise, but at the same time are somehow incapable of rendering a coherent opinion of what they should pay those they employ to run the corporations that they own.

(How could this failure work in practice? One possible explanation is collusion. If the CEO of Company A sits on the board of Company B, and the CEO of B sits on the board of A, then the two CEOs can just agree to raise each other's pay - you scratch my back, I scratch yours.)

Frank's bill would allow shareholders to vote directly on CEO pay packages. Why not? They own the company, after all! And that should, hopefully, put an end to the reports of CEOs who make 1000 times what their workers make, even as they steer the company into disaster.

And this is just one of the issues that Congressman Frank is tackling. Another is the problem of big retailers like Wal-Mart setting up banks to lend money cheaply to themselves (a practice that helped send Japan into 14 years of economic stagnation when those loans went bad). Another is to help make sure that Katrina victims get the insurance money they deserve.

It's all too easy to look at the headlines from Iraq, and to conclude that there really is no difference between Democrats and Republicans. But there is. That difference is in all the little things, the 99% of governing that passes under the radar. And with the Democrats in power, those good little things are getting done every day, and eventually they pile up and make our nation a better place to live.