Spitzer v. incentive compensation

Eliot Spitzer used the office of State Attorney General to attack business abuses caused by common incentive compensation schemes. His major legacy:

Federalism: he took on cases as NY State Attorney General that changed the rules for business across the country. The prospect of 50 ambitious State AG's could Balkanize our national market.

"Looking over the legal landscape of the past few years, there has been this tremendous redistribution of legal power away from Washington, away from the Federal Government, away from Washington, D.C., back to the states. And who better than state Attorney Generals to step into the void to ensure that the rule of law is enforced?"

Note that State AG's are often referred to as "Governors in waiting" and can use high profile investigations to launch political careers.

Securities research: sued Merrill Lynch for promoting stocks of companies whose investment banking business Merrill wanted.

Merrill will put more emphasis on how well the securities an analyst shepherds to market perform, said Rosemary Berkery, Merrill's general counsel. She said analysts would still help bankers identify and evaluate companies that Merrill could take public. Now, the performance of those new stocks, not just the fees earned from them, will affect the analysts' compensation, she said.

That system may open up another conflict, though, some critics said. Analysts may be motivated anew to recommend shares of companies to help improve their short-term performance on that score, they said.

Business Insurance: sued insurance broker/agents like Marsh McClennan and several big insurance companies, like AIG, for business abuses by some brokers caused by incentive payments called "contingent commissions," which rewarded agents for how many of their clients renewed policies with the insurance companies. Now contingent commissions are rare in the industry.

Music Industry: attacked promotional schemes by music companies to encourage radio stations to play their music.

...a Sony BMG executive considered a plan to promote the song "A.D.I.D.A.S." by Killer Mike by sending radio disc jockeys one Adidas sneaker, with the promise of the second one when they had played the song 10 times.

The gifts, described in a $10 million settlement with Sony BMG that was announced yesterday by New York's attorney general, Eliot Spitzer, exemplify what Mr. Spitzer called a broad effort by the recording industry to curry favor with radio station programmers in exchange for their promises to play specific songs.