Wednesday, February 4, 2009

Missing Something...

I just can't see how this is a bad thing:

Obama to limit bankers' pay

WASHINGTON (CNN) -- Executives of companies receiving federal bailout money will have their pay capped at $500,000 under a financial compensation plan that President Obama is expected to announce Wednesday, two senior administration officials said.

I don't have a problem with the government setting this limit. If a company needs a .gov bailout, they should be ready to abide by the .gov rules. If a CEO has performed so pitifully that his company needs to go, hat-in-hand, to the government teat, I fail to see why they should be richly rewarded for their failure. In fact, this would reinforce the need to perform - nothing motivates like the thought of losing giant fistfuls of cash, and having to beg the .gov for bailout $$$ ought to hurt the CEO financially.

For those who make the claim that "if you cap what a CEO can be offered as compensation, you won't get the best CEO possible", well, there's a couple things to note. First, if the company is asking for a bailout, then maybe the company didn't get the best CEO possible. Secondly, what possible motivation is there for a CEO to perform if he can go to the Feds, get a bailout, and still receive a multi-million dollar bonus? We need to reward success, not failure, plain and simple. I fail to see how this measure does anything other than just that.

Believe me, it pains me greatly to admit that Obama got this one right...

UPDATE: Cheerfully withdrawn. I shoulda known better. Mea culpa. Mea maxima culpa...

That is all.

9 comments:

Mulligan said...

No CEO left behind.

we don't want to damage their fragile self esteem by holding them back.

TOTWTYTR said...

I'm afraid I can't agree. The fundamental cause of this problem is too much "help" from the government and more help or direction can only make it worse.

Remember it was the .gov that pushed the banking industry to issue sub prime mortgages in which the rates weren't sub prime, but the loanees certainly were.

What's the next logical step? Setting salaries for companies that do business with the government in any form? So, if your company gets a contract to provide product to the military, is is acceptable that they say "JayG can only make $XXX of of this sale"?

It's a simple step form saying, "If you accept federal money to bail out your company, we control your salary structure." to "If you accept ANY federal money for your company, we control your salary structure".

It's the same slippery slope that starts out saying, "No law abiding citizen needs to own an evil black rifle". You know how that goes.

Jay G said...

That's an angle I hadn't considered, the whole "camel's nose in the tent".

And yes, I can totally see it becoming a slippery slope as you suggest; however, realistically, there's nothing stopping them from doing that right now - hell, they extort the states bad enough as it is. Ever look at just how much money your local school gets from the Feds vs. how many Federal regulations they must abide by?

Perhaps if it were given in the form of loans rather than just a gimme, with an ever-increasing interest rate the longer the loan is out, these companies might see the utility in foregoing huge bonuses in the interest of paying down the loans?

JD said...

Jay - No looking back already is talking about our friend Barny Frank wanting to cap ALL CEO moneys. . . I agree if you take .gov money we should get a say but it is a slippery slope. Maybe we could look at saying any bonus money paid out goes to pay us back. . . ie no bonus if you did so bad you need a bail out. You should also get a .gov anal probe er Audit of the books to see where all the money is going and deduct bail out money for any trips, pay offs, bonuses or such we find later. . . also need to prosecute if we find any laws broken.
As you said, we need to make this hurt so they have incentive to not go for a bail out.

Anonymous said...

The real problem here is the incestuous relationship(s) among the members of the boards of directors of most large companies. If you check out membership on these boards you will find that most members sit on several boards. Many of these people are senior officers in companies. And their board member friends are sitting on the boards at those companies. So what happens is that they all spend more time scratching each others backs then taking proper care of the interests of the corporate shareholders.

If a company loses 30 or 40 million or billion dollars during a business year, that's a pretty good sign that the CEO needs to get a pay-CUT NOT a 10 million dollar bonus.

Anonymous said...

The Gubmint picking The Winners and Losers (Socialism) ALWAYS starts out with the Gubmint "helping" some of the Losers...... then "saving" other Losers.... then It comes to the startling conclusion that they all can't be saved, and starts triage:

VOILA': SOCIALISM- Gubmint deciding who wins and who loses, who lives and who dies, who should be allowed to produce or reproduce, and how much.

Folks, we ARE on that slippery slope and there is a mob behind us that does not believe we are a Republic (they scream Democracy!, and don't understand that it is mob-rule), madly rushing about whichever way the fearmongers of the the media scare them. Don't get trampled, but don't contribute to the problem. Write your gubmint representatives and tell them not to do anything.... the market will correct itself, and monkeying with it is not wise.

Jay G said...

Thanks for the tip JD. Post updated and corrected...

TOTWTYTR said...

As Bruce knows, you can never go wrong by suspecting any politicians motives. They tend to want to add to their power, at the expense of everyone else.

BF is especially vile, and is in fact a socialist.

blogger said...

How about just nationalize them? Then there's no question how "Friends of Angelo" works.

I mean, what could possibly go wrong?