Pay Pals
"The executives targeted by Feinberg are among the most talented and productive at their companies."
Martin Crutsinger and Steven Jacobs, Associated Press
"These people are considered the brains of the machine....this (pay limit) will give them reason to leave."
Steven Hall, executive compensation consultant
If you work for one of seven companies that received a federal bailout last year (1), US Treasury official Kenneth Feinberg decided you must get by with no more than $500,000 in salary this year. Firms that have repaid their government money are no longer subject to the compensation limitations.
Along with many other Americans, I will get by on less than half a million dollars in income this year and every year thereafter, but what will the top executives of the affected firms do?
Steven Hall fears they will quit their jobs, either for work at other firms or to retire. According to reporters Crutsinger and Jacobs, they are particularly talented, and so will be sorely missed.
I, on the other hand, salute Mr Feinberg and the Obama Administration for taking this action. I consider the consequences of the pay cut beneficial, both in the short term and long term.
Short Term Effects: Maybe the people earning multi-million dollar salaries are talented, but every one of them was (in part) responsible for the colossal failures that impelled their firms to seek a federal bailout. Since each of these firms continues to hold my tax dollars in its treasury, I should have some say on how this money is spent; I prefer that the millions slated for executive pay and bonuses be repaid to the treasury, rather than used to reward failure.
But who will replace those execs who leave because of the pay cuts? Just below the top earners at every firm are legions of middle-management people, now earning $200,000 to $400,000, who would be standing in line to take the top jobs for a mere five hundred grand per year. ( Even the President of the United States gets by with only $400,000 per annum (2), so $500,000 is nothing to sneeze at. ) Those who would move up to the top jobs bear less blame for the debacles that ruined their firms than those who would be leaving, so I contend that the quality of executive leadership would improve. In addition, the shake-up will open up middle and junior management positions throughout each firm, creating more opportunity for younger people to get into management and move up. Good!
Long Term Effects: One of the most cogent criticisms of the bailouts of 2008 was that they transferred the risk of bad investment decisions from the investors to the public. While millions of Americans are suffering economic hardship as the result of the recession, brought on by the banking crisis, the executives whose bad judgment triggered the crisis have not borne the consequences. The pay-limitation for bailed-out firms will be a sign for future business leaders that if they take risks that throw their firms onto the mercy of the US Government, they will lose their multi-million dollar paydays as a result. If this prospect is a deterrent to reckless conduct with other peoples' money, then I am all for it!
Full disclosure: Since my employer (Mount Mary College) did not accept any federal bail-out money, my salary will be not adversely affected by Mr Feinberg's rule. So, it's easy for me to support it!
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(1) Bank of America, AIG, Citigroup, GM, GMAC, Chrysler and Chrysler Financial.
(2) OK, the President also gets free housing, rides on AF 1, free postage, lifetime Secret Service protection, and other perks. In addition, former presidents make millions on book deals, speeches and the like.
Martin Crutsinger and Steven Jacobs, Associated Press
"These people are considered the brains of the machine....this (pay limit) will give them reason to leave."
Steven Hall, executive compensation consultant
If you work for one of seven companies that received a federal bailout last year (1), US Treasury official Kenneth Feinberg decided you must get by with no more than $500,000 in salary this year. Firms that have repaid their government money are no longer subject to the compensation limitations.
Along with many other Americans, I will get by on less than half a million dollars in income this year and every year thereafter, but what will the top executives of the affected firms do?
Steven Hall fears they will quit their jobs, either for work at other firms or to retire. According to reporters Crutsinger and Jacobs, they are particularly talented, and so will be sorely missed.
I, on the other hand, salute Mr Feinberg and the Obama Administration for taking this action. I consider the consequences of the pay cut beneficial, both in the short term and long term.
Short Term Effects: Maybe the people earning multi-million dollar salaries are talented, but every one of them was (in part) responsible for the colossal failures that impelled their firms to seek a federal bailout. Since each of these firms continues to hold my tax dollars in its treasury, I should have some say on how this money is spent; I prefer that the millions slated for executive pay and bonuses be repaid to the treasury, rather than used to reward failure.
But who will replace those execs who leave because of the pay cuts? Just below the top earners at every firm are legions of middle-management people, now earning $200,000 to $400,000, who would be standing in line to take the top jobs for a mere five hundred grand per year. ( Even the President of the United States gets by with only $400,000 per annum (2), so $500,000 is nothing to sneeze at. ) Those who would move up to the top jobs bear less blame for the debacles that ruined their firms than those who would be leaving, so I contend that the quality of executive leadership would improve. In addition, the shake-up will open up middle and junior management positions throughout each firm, creating more opportunity for younger people to get into management and move up. Good!
Long Term Effects: One of the most cogent criticisms of the bailouts of 2008 was that they transferred the risk of bad investment decisions from the investors to the public. While millions of Americans are suffering economic hardship as the result of the recession, brought on by the banking crisis, the executives whose bad judgment triggered the crisis have not borne the consequences. The pay-limitation for bailed-out firms will be a sign for future business leaders that if they take risks that throw their firms onto the mercy of the US Government, they will lose their multi-million dollar paydays as a result. If this prospect is a deterrent to reckless conduct with other peoples' money, then I am all for it!
Full disclosure: Since my employer (Mount Mary College) did not accept any federal bail-out money, my salary will be not adversely affected by Mr Feinberg's rule. So, it's easy for me to support it!
------------------------------------------------------------------------------------
(1) Bank of America, AIG, Citigroup, GM, GMAC, Chrysler and Chrysler Financial.
(2) OK, the President also gets free housing, rides on AF 1, free postage, lifetime Secret Service protection, and other perks. In addition, former presidents make millions on book deals, speeches and the like.
Labels: bailouts, exeutive pay
posted by Gerald S Glazer at 10:49 AM
2 comments
