Am I still living in America? It seems that everyone believes that the government must "do something" about executive pay. I have a suggestion, let's do nothing at all!
Executive compensation, and leaving such matters to the shareholders, is NOT, I repeat not, what got us into this mess. Deregulation wasn't the problem either. Let's not forget what caused the financial crisis — borrowers who never cared about the consequences of their loans first and foremost, and secondly, the institutions that relaxed standards (sometimes at the behest of government) in order to give out these loans. This was the problem. Everything else we are seeing is a result of that. You could cap an executives pay at 1 dollar a year and that wouldn't change the mess we are in.
But there is a deeper point here that people are missing. Obama isn't just talking about bailed out companies:
"This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers."
Especially, meaning not only those companies subsidized by taxpayers, but any company that has failed should not be rewarding executives.
As part of Obama's executive compensation "plan" is "A Treasury-sponsored conference on a long-term overhaul of executive compensation" which is not limited to companies that are getting government bailouts. We aren't just talking about the short term here, not just talking about companies bailed out by tax payers. This is extremely serious business.
Carly Fiorina wrote a great article on CNN today saying that caps aren't needed — transparency is. And I agree with her. Shareholders should be involved in these decisions. Not President Obama. Of course, looking at the comments below the article, Carly is roundly criticized and her performance at HP brought out as a counterpoint to her argument. Of course, there is the messenger and the message. This type of character attack, ignoring the argument and focusing on the person making the argument, is something I have come to expect from a certain half of this country for the last eight years.
Let's make this personal. Companies don't just work on one thing. Citibank and BOA may have had some pretty terrible quaters recently. As a stock holder in Citi, I was not thrilled to hear about their new company jet. But Citibank has many divisions. While the idiots in the mortgage division of Citibank may deserve to be fired (and I am sure they have been by now), there are undoubtedly other divisions in the bank that have been profitable. Is it really fair to punish executives that actually returned a profit within the organization because others didn't? Forget fairness, will doing this do anything to help the economy improve?
Mind you, this cap won't just impact executives. This is the beginning of a downward adjustment in pay for everyone down the line. After all, we know what rolls downhill. If the treasury is recommending limits on pay for executives, boards will take that as a guideline, and the media will point to companies that don't fall in line. Additionally, people who aren't executives and make less, will be forced to take a cut as well, after all if the CEO is making $500,000 a year, a mere director shouldn't be earning $250,000, and so on, and so on, down to the guys in the mailroom.
When I was young, my Grandfather told me why our family came to America. "The streets are paved in gold," he said, adding that you could come from nothing and rise to the highest levels if you work hard and smart enough. Now I am no executive, I won't be directly impacted by this. But maybe I'd like to become an executive one day. Better yet, I want my children to have the same opportunities I have (had). Yet, it seems that we are leaving future generations an America whose streets are paved, not in gold but rather government cheese.
Am I the only one that sees this for what it is? Namely the end of America as a land of opportunity?Powered by Sidelines