Reality emulates Atlas Shrugged, example #739
Posted by Richard on October 23, 2009
With apologies to Martin Niemöller:
First they went after executives at bailed-out companies, and I did not speak out because I was not an executive at one of those companies.
President Barack Obama has welcomed plans to force some companies which accepted government aid during the financial crisis to cut executive pay.
Firms paying bosses vast bonuses while getting state assistance offended peoples' values, the president said.
Under Treasury plans, seven companies must slash the basic salaries of their 25 best-paid employees by up to 90%.
…
As well as its top-earners facing a 90% pay cut, the total paid to each firm's 125 top earners would be halved under the proposals.
Then they went after bankers in general, and I did not speak out because I was not a banker.
The Federal Reserve’s new push to regulate pay levels of bankers probably won’t include a review of your friendly neighborhood branch manager’s salary.
But the Fed made clear Thursday that it will be looking at compensation arrangements beyond the executive suites of the 6,000-some banks it regulates.
…
Bottom line: The obsession with financial companies' pay levels, far from reaching a peak, is just ramping up.
Then they hinted at going after all private sector employees, and I did not speak out because I was too stunned.
Discussing Obama administration efforts to limit executive pay in companies that took TARP funds, on Thursday’s CBS Early Show, co-host Harry Smith asked Congressional Oversight Panel Chair Elizabeth Warren: “Chuck Schumer, some others, have said…why wouldn’t we…make this law across the board and put a governor on compensation for everybody in private enterprise?’”
Warren seemed very open to the idea: “Well you know, it reminds us that there is a compensation problem in American industry….executive compensation right now is – has got the wrong set of incentives in it….what we really need to do are change the basic laws to align the incentives of the executives with the long-term health of the company and ultimately the long-term health of the economy.”
And then … ?
David Bryant said
There’s a good editorial on this subject in the Wall Street Journal today.
Congress acted (in 1992) to limit executive compensation at all publicly traded companies (by making salaries in excess of $1 million non-deductible on corporate tax returns). That spawned a cottage industry for “consultants” who give advice on “performance based” compensation. The net result was a tremendous ”increase” in executive pay.
There is no reason to believe that the current attempt to regulate compensation will turn out the way this administration wants it to. The law of unintended consequences is still in effect.