Baseball Crank
Covering the Front and Back Pages of the Newspaper
March 30, 2009
POLITICS: Bigger and Closer to Power

My RedState and New Ledger colleague Francis Cianfrocca, working off the same Matt Yglesias piece I noted below, gets to the core of the issue of executive compensation:

The problem is that, because of tight arrangements with government, the largest companies really don't have to perform well. They're insulated from competition in ways that also make it possible for their CEOs to receive high income even if they destroy shareholder value.

But that should properly be a matter for those shareholders. We really ought to solve the problem of unfair government support for large businesses. Unfortunately all of Washington's policies, from financial bailouts to increased innovation-killing regulations and taxes, are taking us in the other direction. If you don't like big CEO pay for poor performance, you'll hate the future even more than the present.

This leaves us with what the American people really want. They don't want to see salary caps at all, and certainly not for successful people. They want to avoid rewarding failure with tax dollars.

Posted by Baseball Crank at 6:00 PM | Business • | Politics 2009 | Comments (5) | TrackBack (0)
Comments

I don't want government control of business or arbitrary salary caps, but it is very obvious that corporate boards have failed in their responsibility. It is a drawback of the dilution of ownership by mutual funds, index funds, etc. Sure the shareholders theoretically own the company. However, when company's ownership is spread so thin it really has no power. We are not far from seeing government regulation over CEO and other executives pay and this is just the administration to use the next egregious case as an opportunity to take that action.

Posted by: largebill at March 30, 2009 11:17 PM

"I don't want government control of business or arbitrary salary caps, but it is very obvious that corporate boards have failed in their responsibility. It is a drawback of the dilution of ownership by mutual funds, index funds, etc. Sure the shareholders theoretically own the company. However, when company's ownership is spread so thin it really has no power."

Exactly. I don't know how Francis can say with a straight face that CEO's high salaries are somehow tied to tight arrangements with the government. It's difficult to take that argument seriously.

I'm completely against salary caps being imposed from the government, and it's true that people want to avoid rewarding failure with tax dollars. But it's also true that people don't like CEO's to be rewarded for poor performance, e.g. golden parachute clauses, etc. It's not the level of compensation necessarily, it's how that compensation is structured.

Posted by: MVH at March 31, 2009 7:33 AM

While I feel that CEOs compensation is out of control; I am totally against the government stepping in. When have they provided reason to any issue? The last thing I want is Barney Frank, Nancy Pelosi, Chris Dodd, Barack Obama of the world telling corporations what to do. They can't even handle their own jobs!

What a mess Congress has created and the administration is making even worse! Do these people have any clue what they are doing? Are they so pro big government (and move towards Socialism) that they actually want the things that are occuring to happen?

Less than 46 months to go!

Posted by: Lee at March 31, 2009 9:48 AM

Do these people have any clue what they are doing?

At some point, you really have to rule out incompetence, don't you? I mean, no one gets everything completely wrong unless there's some sense of purpose to do so.

Posted by: Agent W at March 31, 2009 1:42 PM

"What a mess Congress has created and the administration is making even worse!"

Wait a minute, has the administration done anything about this yet? Not from what I'm seeing:

"Chief executives of the nation's biggest financial institutions emerged from a meeting with U.S. President Barack Obama Friday pledging to cooperate with the White House's effort to steer the economy out of its mess.

Executives said the tone of the more-than-90-minute session was open and cordial, with both sides looking to move beyond recent divisive rhetoric.

"We're just in this together. There's still some hard work to do, but [it was] a pleasant meeting," said Bank of America Corp. (BAC) CEO Ken Lewis.

White House spokesman Robert Gibbs called the get-together a "good, productive and frank conversation."

One participant said the meeting was free of drama. Obama acknowledged that the past few weeks have been rough for banks, but made clear that the general public is angry over excessive compensation. He asked THE INDUSTRY to help rein in the issue.

The CEOs agreed they had to make clear that they understood the public's concern over taxpayer-funded bailouts, according Freddie Mac (FRE) CEO John Koskinen. The executives, however, said government programs need firm rules that don't change with the political winds"

http://online.wsj.com/article/BT-CO-20090327-714118.html

It sounds like his recent meetings with CEO's was pretty positive, so I'm not sure we have much to worry about regarding salary caps.

Posted by: MVH at March 31, 2009 2:41 PM
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