The NYT did its own analysis of CEO compensation last weekend.  As part of the series, one of the articles examined the role of the board of directors in the process.  It noted that one of the culprits was the State of Delaware (or at least the courts).  According to the piece:

• In the absence of fraud or self-dealing, it’s hard for shareholders to make a legal argument that boards have failed at their job. State law in Delaware, where most big public entities are incorporated, simply requires companies to have boards that direct or manage their affairs, and it affords broad legal protection to board members so long as they act in good faith and in a manner “believed to be in or not opposed to the best interests of the corporation.”

• That was the basis for the recent ruling of a Delaware judge who threw out most of the claims in a shareholder lawsuit seeking to hold Citigroup directors and officers liable for big losses tied to subprime mortgages. But the judge did allow the plaintiffs to pursue one of their claims, which alleged corporate waste stemming from a multimillion-dollar parting pay package that Citigroup’s board awarded Charles O. Prince III, the former C.E.O., in 2007.

• While legal protections for directors have changed little over the years, boards have operated under a new level of scrutiny since enactment of the Sarbanes-Oxley law, Congress’s answer to the scandals at Enron and WorldCom. Among other things, this 2002 law strengthened the litmus test for director independence and laid out new responsibilities and requirements for boards’ audit committee members.

 The article was perhaps subtle but accurate.