Caps on Executive Pay

[Giant Communist Robot]

...are a bad idea.


When a company needs to hire a top executive, they want the best they can get. The best candidates can have their pick of where to work, because every employer wants them. Consequently, pay goes up. In order to justify higher pay, companies offer a smaller salary with large bonuses, which are tied in some way to measures of their performance. That way the company gets the executive they want and will only have to pay him if he performs as they need.

I think in some number of cases companies receiving bailouts are not entirely responsible for their poor financial position. The economy has hurt some.

Why would an executive want to stay with a company for 500K when a similar job performance somewhere else could earn him 20 million? Would some similarly desired executive looking for a job take that smaller pay package? The best and the brightest will go elsewhere. To be fair, shouldn't this cap be company-wide and scaled accordingly? After all, for most companies wages are one of the biggest expenses and executive pay is actually a small part.

[Haggis@wk]

...are a bad idea

Every Federally mandated industrial policy has failed and so will this one.

[jamiebk]

Things such as this are common in the private sector. For instance, when a bank makes a loan to assist a company with cash flow, there are very often stipulation as to how the money can be used. If a compny is requesting TARP money it seems to me that poor decision-making and management probably got them to that point. Limit salaries???? I'd fire the bums

[shostakovich]

Consumers Report takes the effort to demonstrate the "best" is not always the "most expensive". Similarly, the "best and brightest" needn't require the highest salary. Unfortunately, evaluating prospects for a position can be too daunting for a personnel department. Maybe personnel depts would do well to study "Consumers" methods.
Shos

[Giant Communist Robot]

I'd fire the bums

Heartless liberal. If a man lives up to his end of the bargain, why shouldn't the company? I know, I know, the company is going bankrupt; but just how much of that is due to the collapsing economy? Is that say, Rick Wagoner's fault?

Consumers Report takes the effort to demonstrate the "best" is not always the "most expensive".

I get it; I see you're comparing a person to a toaster or vacuum cleaner. My assumption is that all other things being equal, people will ask for more money.

[jamiebk]

I get it; I see you're comparing a person to a toaster or vacuum cleaner. My assumption is that all other things being equal, people will ask for more money.

Why not...turnabout is fair play...most CEO's treat company employees like furniture to be bought, sold, or moved. If you don't bring value, you are "out". ANyone ever read "who moved my cheese?"?

[analog]

something went awry with our boomer generation's sense of balance (i say our because i'm one, 1946 vintage).
Gracie Slick foretold it in that line from "White Rabbit", 'when logic and proportion have fallen softly dead, the white knight is talking backward and the red queen's on her head..."

those who made it to executive ranks see it as a license to excess.
Albert Speer said in his memoir 'Inside the Third Reich" , when you're living in a fishbowl it's difficult to realize just how murky it has become.

What can explain an otherwise decent person accepting obscene amounts of money?
I not heard of Paulson offering to return any of the $500 million he got from Goldman-Sachs, or to pay any of the tax on it that Congress waived for him.

Something is very wrong and methinks it's a societal malady not a fiscal one.

[Giant Communist Robot]

What can explain an otherwise decent person accepting obscene amounts of money?

Point of view, likely. How did wealth get to be an obscenity?

Sometimes I've heard comments about actors and athletes getting enormous checks, but they are paid for the value they bring to their product. Same with big execs, except instead of popularity they bring ability to work.

[jamiebk]

they are paid for the value they bring to their product. Same with big execs, except instead of popularity they bring ability to work.

CEO's are slaves to the shareholders. They are endowed with the responsibility to raise the stock value of the company and keep it on track as a strong and viable enterprise. If they can't perform, they should be fired like any one else. They expect golden parachutes for failed performance...I don't see where anyone owes anything to them.

If this was a coach on a last place football team it would be no different. If the team can't win, the coach gets fired.

[shostakovich]

Obscene is in the eye of the beholder. An imbalance of wealth amidst poverty caused the French and Russian revolutions. Albert Schweitzer, Mahatma Gandhi, Mother Theresa, and others brought a lot of good (Their "product" was compassion.) to many people, and never thought of monetary compensation. As for the athletes and actors making millions, if they don't do any good for others with their fame and fortune, they should (but likely won't) be ashamed. Most, but not all, of the people I know feel this way. If everybody felt this way, there would be no big problems to overcome --- except, of course, overpopulation.
Sanctimonious Shos

[analog]

It's not wealth but gluttony that's obscene.

Humility and fair dealing used to be virtues. What happened?
There's a Navy leadership training film that says we will become whatever we had for childhood heroes.
Some folks must've discarded Hopalong Cassidy for JR Ewing.
How different things might be had Lorimar cast Peter Lorre instead of Larry Hagman !

a.

[Shapley]

I've always figured the government has the right to put pre-conditions on the money it gives out. Pre-conditions, not post-, mind you, which seems to be the tack that President Obama is taking. He is not attempting to apply his caps to those who received bailout funds through President Bush. Good on him, he seems to understand the limitations of power.

I"m not sure the caps are a good idea but, as I said, if you go begging you are at the mercy of the giver. If you don't like the conditions, don't accept the handout...

[barfle]

I'm considering reviving my own failed enterprise, asking for bailout money, and promising not to make over $500,000 per year.

[dai bread]

Several people in various places have pointed out that there is an inverse relationship between a CEO's pay and his company's performance. The car-makers could well illustrate that.

In this country recently, the CEO and Board of one of our shareholder-owned power companies wanted pay rises. It was pointed out that their counterparts in at least one State-owned power company got considerably less and did at least as good a job in a bigger company. The rises are on hold.

Most of the comments in earlier posts are very theoretical, and the private sector at least, doesn't work that way any more. Not in this country, anyway.

[DavidS]

In this country recently, the CEO and Board of one of our shareholder-owned power companies wanted pay rises. It was pointed out that their counterparts in at least one State-owned power company got considerably less and did at least as good a job in a bigger company. The rises are on hold.

What kept them from transferring to the private sector - lack of demand from the ps; job security; idealism...?

[dai bread]

I don't know. Company size, I expect, plus better job security. Also, despite my low opinion of politicians, a better class of Director. Certainly, ones with real clout, being in the Govt.

[Shapley]

Several people in various places have pointed out that there is an inverse relationship between a CEO's pay and his company's performance. The car-makers could well illustrate that.

That tends to make some sense. Profitability requires an eye on the bottom line, and that requires a check on salaries. CEO's who salaries are kept trim are leading by example.

[jamiebk]

The company I work for made $3,000,000,000 (billion) net income last year. Yesterday, they announced that there would be no salary increases for anyone. I guess we didn't make enough money.