Wednesday, February 04, 2009

Executive Compensation

So the idea is that we should cap the pay of executives at companies receiving federal money during the bailout. It's a good thing this didn't spread to all executives-- of course, that would be ridiculous, but we're living in ridiculous times and, sadly, you can't rule anything out.

Let's assume that executives know their worth to a company; this idea can only force executives from their positions. And let's assume that this worth is reflective of their actual worth; so we're going to force the people who can run these companies best from their positions at a time when they probably need good leadership more than ever?

Not that it would justify the amount of spending that seems to be coming in the near future, by any means, but what if there were a rule that dictated that all stimulus/bailout funds allocated to companies were used solely for executive compensation? If we offered Donald Trump $45 billion to run Citigroup, do you think the company would be any better off? I'm not saying that Trump would be the right person...but for $45 billion, could you generate a pool of executives that could offer a brighter future for these companies? I don't know. But it's interesting to think about.

And what about the compensation of the president? By the opinion of people ordering such measures, is our country a well-performing company? It's been taking tax-payer stimulus support for over 200 years. Executives in the aforementioned companies are going to be scrutinized for holiday parties; what about the scrutiny for this? Last month, Citigroup was forced to cancel a corporate jet that was set for delivery; does our president have a corporate jet he uses for the job?


Dana said...

You have to remember though that half of the crap the office of the President has (like baller cars and planes) are more for security reasons than anything else. I think Obama has a better chance of being shot if he had to fly commercial than an executive at Goldman. Also, the office of the president wasn't a private corporation that now is asking for public funds to remain in business. Now, the Fed on the other hand...

Jason O. said...

Mr. Ryan,
I concur.
The theory of salary caps alone has many flaws in its best form.
Entirely all too often public officials, particularly of the elected persuasion are far to self righteous and believe they (the elected official) are above most or all social norms, reasonable behavior, and fiscal responsibility. This is made possible by legislation which mandates salaries of elected officials. In many cases at all levels of government this mandate on elected officials salary does not include any language or specificity of the role or actions of the individual—in the business world this would be referred to as a position description—it merely uses ambiguous terms such as malfeasance, misfeasance, and misconduct.
This illustrates only a part of the problem. The other part being that if you or I as an employee had the opportunity to establish our terms of employment precisely as the elected official do, would things be different? I have previously held elected office and I did not volunteer to lower my salary nor did I donate my mandated salary to any cause, or did I behave in a manner which increased the cost of government because I was in the highest office in my political jurisdiction. Instead I attempted to do the best job I was capable of performing given my constraints.
I believe it is time that the American people start placing more constraints on its elected officials, via elections. Some may say that the November 2008 elections did just that by removing many republican seats from both chambers of the U.S. bicameral system, although, I dare to say that the only thing that has been accomplished is that we have replaced politicians with more politicians. Our government offices sadly have commonalities with our communities’ jail cells. It is impossible to improve the clientele. So we should consider ourselves fortunate that at least our government is not growing in the number of politicians we elect and pay each election cycle. That would create a true financial crisis!