Is a CEO of a U.S. public company allowed to hire a consulting firm for which he is the sole or primary employee?
Suppose a compensation committee within the board of directors of company ABC decides the CEO is worth $10mm per year. That said, the CEO believes he is actually worth $20mm per year. To avoid these rules, the CEO starts XYZ consulting corporation for which he is the only employee. CEO then has ABC hire XYZ as a consultant, paying XYZ $10mm per year. As a result, CEO of ABC is effectively being paid $20mm per year even though the board only approved $10mm per year.
This certainly seems like a violation of shareholder trust and like a way of evading the control of a compensation committee. That said, is this actually illegal under U.S. corporate law? If not, under what laws would this be illegal?
Bonus question: is illegal for a Canadian company that trades on a U.S. stock exchange, like the NYSE?