Thomas M. Miovas Jr. Posted February 4, 2009 Report Share Posted February 4, 2009 In a news article this morning, Obama et al want to limit the pay to executives of those companies accepting TARP loans from the government. Last week, Obama called it "the height of irresponsibility" for employees to reap the billions in bonuses they got last year. A report from the New York state comptroller found employees of the New York financial world earned about $18.4 billion in bonuses last year. Which ties in the moral with the practical -- i.e. the morality one accepts determines what one thinks is practical. The administration will also propose long-term compensation restrictions even for companies that don't receive government assistance, the official said. Basically, this action will limit executive pay to that of the pay of the President. Compensation envy? Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted February 4, 2009 Report Share Posted February 4, 2009 I don't know how I feel about his proposal. Since bailouts are immoral and should not exist, period, and businesses have been actively advocating these programs, I think it is appropriate that people understand what exactly the bailout is. It is altruism: taxpayers are being forced (at gunpoint) to sacrifice themselves for the sake of others. The companies do, unlike taxpayers, have a choice: they can value their exec compensation packages higher than the free money that will save the company and refuse the money, or they can sacrifice their personal economic status at least in the short term for "the greater good". The real evil is the camel's nose in the tent, of limiting all executive compensation, independent of receiving a bailout. This is the point that I think we need to research and combat, because it represents a fundamental break with our free-market past. I bet such a restriction would be held unconstitutional. Quote Link to comment Share on other sites More sharing options...
utabintarbo Posted February 4, 2009 Report Share Posted February 4, 2009 ... Basically, this action will limit executive pay to that of the pay of the President. Compensation envy? Yeah, 'cause those wage & price controls worked so well for Nixon. Except in this case, there are no price controls, so the only possible justification is envy. Quote Link to comment Share on other sites More sharing options...
Jake_Ellison Posted February 4, 2009 Report Share Posted February 4, 2009 (edited) I would agree whole-heartedly with a law that limits pay to 500.000, or even less, to every employee of the government, and every employee of any company that is the (future) beneficiary of taxpayer-money, for a set time from the moment the last dollar was delivered (let's say 3 years). Such a measure would make it so painful for a company to accept a bailout, that both the leadership and the creditors would prefer bankruptcy, and those few companies that do accept such a bailout, would see their leadership and most competent workers just leave, and the company fail in months. However, that's not what this is: this piece of "legislation" will leave it up to the executive branch of the government (White House, Treasury, regulators, etc.), to decide who fits into the category of limited pay and who doesn't, based on their subjective judgment. It will also require companies who are not beneficiaries of any assistance, to submit to certain rules that limit compensation, and it might also force all companies (including the ones who never received any money), to ask direct permission from regulators and/or other bureaucrats, before deciding on any type of pay. Such a bill, in its worst incarnation, would practically deliver the whole of the economy under the control of the Executive Branch of the Federal Government. In the least, it would be retroactive, and thus break with a long legislative tradition. [edit] What this also does is answer, once and for all, the question of Obama's pragmatism: if he was a principled man, he would've simply went for the strict limit on pay I describe in the first paragraph. After all, he has a moral justification for this bill, and that applies to all those who receive money from people making far less than 500 grand. Only a pragmatist would instead try to pass a bill that will appease his "principled" political base, but at the same time give himself enough room to be able to keep the bailout program alive, by just ignoring the principle behind the legislation. Edited February 4, 2009 by Jake_Ellison Quote Link to comment Share on other sites More sharing options...
Capitalism Forever Posted February 4, 2009 Report Share Posted February 4, 2009 The real evil is the camel's nose in the tent, of limiting all executive compensation, independent of receiving a bailout. [...] I bet such a restriction would be held unconstitutional. "Would" is a key word there. It certainly would be held unconstitutional in the kind of nation that the Founders intended America to be--but Obama will be working to make sure that, if such ideas still linger in the minds of any Supreme Court Justices, they get changed as soon as possible. And once all executive pay has been limited, the next step will be to limit all pay--yours included. Well, all pay other than that of politicians, of course. And when they've got the maximum wage in place alongside the minimum wage, it isn't difficult to guess what the next step will then be: to bring them closer and closer together, until any difference between them vanishes. I guess they would have preferred a great worldwide proletarian revolution, but if they can get the same goal accomplished democratically, by little change after little change, they'll take that as the next best thing. This is why it is so crucial to make people understand that a democracy is antithetical to individual rights. As long as people keep thinking that the Soviet Union was a bad place because "it wasn't a democracy," America will remain on course to becoming just the kind of nation the Soviet Union was. Quote Link to comment Share on other sites More sharing options...
Thomas M. Miovas Jr. Posted February 4, 2009 Author Report Share Posted February 4, 2009 It looks like Obama has made this as a law, perhaps under the Executive Orders ability. "WASHINGTON – President Barack Obama on Wednesday imposed $500,000 caps on senior executive pay for the most distressed financial institutions receiving federal bailout money, saying Americans are upset with "executives being rewarded for failure."" And further, the President and the Treasury are trying to limit all executive pay: The administration also will propose long-term compensation restrictions even for companies that don't receive government assistance, Obama said. Those proposals include: • Requiring top executives at financial institutions to hold stock for several years before they can cash out. • Requiring nonbinding "say on pay" resolutions — that is, giving shareholders more say on executive compensation. • A Treasury-sponsored conference on a long-term overhaul of executive compensation. This is government intervention where it has no right to be. Looks like we are heading towards policies in which the Treasury and the President can set terms to executive pay on their whim. Quote Link to comment Share on other sites More sharing options...
Zip Posted February 4, 2009 Report Share Posted February 4, 2009 Wow, less than a month in power and Obamasatan has managed to eliminate freedom in America. "Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries." Ayn Rand How long will the people in this particular mineshaft (America) continue to say "it's not that bad!" while the canaries pile up like corpses at Gettysburg? Quote Link to comment Share on other sites More sharing options...
K-Mac Posted February 4, 2009 Report Share Posted February 4, 2009 It will be interesting to see how these banks "recover" by scraping the bottom of the CEO barrel. From http://www.breitbart.com/article.php?id=CN...;show_article=1 : Wall Street and the business community gave a lukewarm response Wednesday to the US administration's plan to cap executive pay, fearing it may lead to a talent exodus and delay recovery in the finance sector. and Douglas McIntyre at the financial website 24/7 Wall Street said the limits could make it more difficult for troubled banks to retain their best executives. Ya think?! Quote Link to comment Share on other sites More sharing options...
Greebo Posted February 4, 2009 Report Share Posted February 4, 2009 This is only going to apply to companies that *take* tax money, right? If so, then they already lost the right to act freely by agreeing to take it. If they want to be free (as much as possible) from such restrictions, then let them be so only if they refuse money taken by force. Quote Link to comment Share on other sites More sharing options...
Zip Posted February 4, 2009 Report Share Posted February 4, 2009 Thomas had posted this quote; The administration will also propose long-term compensation restrictions even for companies that don't receive government assistance, the official said. but I searched the article he linked (http://www.foxnews.com/politics/first100days/2009/02/03/obama-plans-cap-executive-pay-government-assisted-financial-institutions/) and couldn't find it. So I think you are correct Greebo, unless Thomas can point out where that quote came from... Thomas? But to be clear, I think that even if that distinction is clear now (only the ones who took money will be held to the cap) I don't hold out hope that it will continue to be so. Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted February 4, 2009 Report Share Posted February 4, 2009 "WASHINGTON – President Barack Obama on Wednesday imposed $500,000 caps on senior executive pay for the most distressed financial institutions receiving federal bailout money, saying Americans are upset with "executives being rewarded for failure.""Why do people not understand that there are consequences for denying that A is A? Quote Link to comment Share on other sites More sharing options...
Steve D'Ippolito Posted February 4, 2009 Report Share Posted February 4, 2009 Well, *especially* in the political realm, denying that A is A is often rewarded. At least for a few years, which is all that matters. Quote Link to comment Share on other sites More sharing options...
Jake_Ellison Posted February 4, 2009 Report Share Posted February 4, 2009 (edited) This is only going to apply to companies that *take* tax money, right? The precise answer is: No. The 500G limit itself yes. (and that limit on those execs who took money, can be set apparently at the whim of the executive, since they already have permission to distribute the 700 bn as they wish. And they intend to set it quite selectively, the criteria they mentioned is about as vague as it can get.) However, limits will be placed on everyone. At first, the rules will change, mandating that shareholders have to vote on the executive's pay (a non-binding vote, for now). Second, the executives won't be allowed to cash out on their options for years, and then there's the possibility of further limits, which may be set by the Treasury, apparently. No one mentioned what those may be. [while this second part is not yet a law, Obama said it himself, and I don't see how it could be stopped: it is a popular measure, and his party controls both chambers] All this info came from the article Thomas is linking to in the first post. Edited February 4, 2009 by Jake_Ellison Quote Link to comment Share on other sites More sharing options...
The Wrath Posted February 4, 2009 Report Share Posted February 4, 2009 My 2 cents: I have no problem with it unless it is extended to all CEOs of all private companies. If these companies have been begging for tax money and receiving it, I say let them reap what they sow. Quote Link to comment Share on other sites More sharing options...
K-Mac Posted February 4, 2009 Report Share Posted February 4, 2009 Yes, but weren't some banks forced to take it? Why should their execs suffer for it? Quote Link to comment Share on other sites More sharing options...
softwareNerd Posted February 4, 2009 Report Share Posted February 4, 2009 The details are unclear, but it appears that this might be restricted to: - Those who took "exceptional" amounts under TARP (Not sure what that means, many billions of dollars were forced upon some banks... are billions unexceptional?. We'll have to wait and see how many billions it has to be before Obama considers it an "exceptional" waste of tax-payer money) - Those who take amounts in the future Further, Marketwatch reported that a provision in the law will allow a company's shareholders to pass a resolution over-riding the limit, and allowing pay over $500k. The government needs to get out of the bail-put business, instead of getting deeper into it, with more rules and limitations. Quote Link to comment Share on other sites More sharing options...
Thales Posted February 4, 2009 Report Share Posted February 4, 2009 Regardless of the specifics of this plan, the basic idea isn't good. When you limit executive pay, it results in the best and brightest not taking the jobs and the result is that corporations are led by dumb guys. Oh, that that's great for the bottom line. I mean, think about this. It has massive repercussions throughout the entire economy. The guys at the top affect the quality at the bottom in a major way. A smart guy will make better decisions, resulting in higher quality goods and services, better overall company performance, more jobs, and better jobs. Multiply this by all of the companies in the economy and the effect is amplified massively. When executives makes tons of cash, that's a good thing, not a bad thing. Conversely, when you have dumb guys at the top, it means a poorly performing economy. Disparity in income is actually an engine that drives the economy, the bigger the disparities, the more power in the economy. Quote Link to comment Share on other sites More sharing options...
The Wrath Posted February 4, 2009 Report Share Posted February 4, 2009 Regardless of the specifics of this plan, the basic idea isn't good. When you limit executive pay, it results in the best and brightest not taking the jobs and the result is that corporations are led by dumb guys. Oh, that that's great for the bottom line. I mean, think about this. It has massive repercussions throughout the entire economy. The guys at the top affect the quality at the bottom in a major way. A smart guy will make better decisions, resulting in higher quality goods and services, better overall company performance, more jobs, and better jobs. Multiply this by all of the companies in the economy and the effect is amplified massively. When executives makes tons of cash, that's a good thing, not a bad thing. Conversely, when you have dumb guys at the top, it means a poorly performing economy. Disparity in income is actually an engine that drives the economy, the bigger the disparities, the more power in the economy. I think the argument here is that large amounts of money did not attract people who managed the businesses well...otherwise, this mess might not exist. I agree that, in general, this would be a bad idea...though, as I already said, if these businesses are going to accept taxpayer funding, they have no right to complain when the government starts trying to control them. Quote Link to comment Share on other sites More sharing options...
SD26 Posted February 5, 2009 Report Share Posted February 5, 2009 (edited) Yes, but weren't some banks forced to take it? Why should their execs suffer for it? That was my thought today when I heard the limits. Why put in the effort? Why not walk out with what you have and let someone else do a multimillion dollar job for $500k...if they can? Or just sit in the position and do "$500k" work... Edited February 5, 2009 by SD26 Quote Link to comment Share on other sites More sharing options...
Thales Posted February 5, 2009 Report Share Posted February 5, 2009 I think the argument here is that large amounts of money did not attract people who managed the businesses well...otherwise, this mess might not exist. In a free market quality rises to the top, but when the government provides money (by looting the citizenry) it ends up going to everything except what makes sense for business. Usually it goes to unscrupulous people who have influence in Washington, rather than people who know how to run a particular kind of business. So, this is the problem. I agree that, in general, this would be a bad idea...though, as I already said, if these businesses are going to accept taxpayer funding, they have no right to complain when the government starts trying to control them. What is clear here is that tax payer funding of business is a bad idea from top to bottom. It's immoral and it’s impractical. Quote Link to comment Share on other sites More sharing options...
Thomas M. Miovas Jr. Posted February 5, 2009 Author Report Share Posted February 5, 2009 Thomas had posted this quote; but I searched the article he linked (http://www.foxnews.com/politics/first100days/2009/02/03/obama-plans-cap-executive-pay-government-assisted-financial-institutions/) and couldn't find it. That quote was cut and pasted from the original article, but they took it out in an update, apparently. Some news agencies do that -- which I dislike because you tell the world and then you can't back it up. There was a lot of talk about this during the morning and afternoon news channels, especially on MSNBC and maybe the administration changed their minds on that. However, there is one story still out there about the Treasury wanting to redo all companies compensation structure: http://news.yahoo.com/s/ap/20090204/ap_on_...t_executive_pay Quote Link to comment Share on other sites More sharing options...
Zip Posted February 5, 2009 Report Share Posted February 5, 2009 That quote was cut and pasted from the original article, but they took it out in an update, apparently. Some news agencies do that -- which I dislike because you tell the world and then you can't back it up. There was a lot of talk about this during the morning and afternoon news channels, especially on MSNBC and maybe the administration changed their minds on that. However, there is one story still out there about the Treasury wanting to redo all companies compensation structure: http://news.yahoo.com/s/ap/20090204/ap_on_...t_executive_pay Thanks for clarifying. I thought something like that had happened. Quote Link to comment Share on other sites More sharing options...
pam Posted February 5, 2009 Report Share Posted February 5, 2009 (edited) *edit* already posted by Thomas Edited February 5, 2009 by pam Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.