One year after the government bailed out Wall Street, Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) are awarding record billions in bonuses. Clearly, compensation practices are just as out of line now as they were before the financial crisis. But compensation is just one part of the larger issue of corporate governance weighing on companies across America.

According to Nell Minow, editor and co-founder of The Corporate Library, a research firm that focuses on corporate governance, agency costs and conflicts of interest are the inherent problems in corporate governance today.

"If you're going to have a large, complex organization, and you're going to take capital from people who are not going to be in the boardroom all the time, what can we do to ensure those directors are as vitally concerned with the long-term success of the organization? That's what corporate governance is all about," Minow said on a recent visit to Motley Fool headquarters.

The Corporate Library rates 3,500 firms with letter grades -- and out of those 3,500, only four have been awarded an A. In general, Minow argues that founder-run firms are a great solution to the "agency cost" problem, in which shareholders' interests are not aligned with those of management. In a founder-run company, the CEO still has most of his or her net worth in the company; thus, for both personal and financial reasons, he or she remains dedicated to making sure the company succeeds.

If more companies were like hers, Minow says, things would be better. All of the shareholders in The Corporate Library are on the company’s board. "It's our money that's at risk, and we care very much how it all comes out," she says. "So we're focused on making sure it all works."

Just one wish
So if Minow had a magic wand, what’s the first thing she would change? She says her first wish would be for a change in Delaware state law. Many companies are incorporated in Delaware, and under the state’s current law, any member of a company’s board who gets at least one vote -- even if it's their own -- is allowed to remain. According to Minow, more than 90 people are currently serving as members of a board even though a majority of the shareholders voted for them to go. Minow argues that if shareholders cannot replace directors who get it wrong, the problem will remain.

Revamping financial reporting
There are two areas of financial reporting Minow thinks should be rectified. The first: When the SEC was originally drawing up rules for the disclosure of executive compensation information, it was going to require companies to provide data on their top five highest-paid employees. However, companies were not in favor of that. For instance, people working on the trading desk didn't want the public to know what they were getting paid. Companies were able to coax the SEC into requiring information on the top five officers of the company instead. "So we get a lot of information about what the CFO makes, and not so much about how the company is managing its overall incentives," says Minow.

Minow says she would like to see aggregate information about anyone in a company who gets more than 50% of their income in the form of a bonus -- both the amount of compensation, and the criteria for awarding it.

Second, Minow says we are using 19th-century accounting principles for 21st-century companies. She believes accounting needs to be changed in a very fundamental way -- so that it's more about risk and intellectual and human capital, and less about hard assets. "We get a lot of information about the desks, the chairs and the real property, and not that much information about the people, education, relationships, and ability," she said.

Corporate governance and society
Minow says the failure of corporate governance can produce a recession like the one we've just experienced -- because corporate governance is about assessing and managing risk. Failure to do that, according to Minow, means that risk gets externalized onto the taxpayers and the rest of society.

I had the opportunity to interview Yale finance and economic professor Robert Shiller recently, and he echoed Minow's sentiments. He told me that the latest executive compensation issue exemplifies the widening gap in economic inequality in this country, which he says is bad for the future of America.

In the wake of extravagant bonuses from Wall Street firms, Shiller says the angry populist chorus is growing louder, and it's starting to lead to ugly resentment. To that end, Shiller says it's time for the nation to think seriously about restraining any further increases in economic inequality.

For related Foolishness:

Fool contributor Jennifer Schonberger does not own shares of any of the companies mentioned in this article. The Motley Fool has a disclosure policy.