Wednesday, February 04, 2009

The problem with limiting executive compensation

As has been oft discussed over the past few months, President Obama now wants to limit executive compensation as part of the new economic stimulus package. I actually do agree with the sentiment- why should taxpayer dollars go to pay millions of dollars to an executive of a struggling company- but I have two major worries about the implications of such a policy.

First, there's no real logical reason to limit the government's reach solely to executive compensation. If the government can step in and set limits as to executive compensation, than why shouldn't they be able to dictate any and all compensation within a firm? In fact, why not any and all expenses?

Second, what about other companies not part of the economic stimulus, but still receiving some form of government benefits through prior or future laws. American is well known for it's agricultural subsidies for example, so why shouldn't companies benefiting from those subsidies face similar scrutiny?

My point is the all-so-obvious slippery slope that justifies any and all government intervention into the economy. With taxpayer money involved, the conduct of business literally becomes everyone's business. The truth is that limiting executive compensation isn't about doing anything for the economy, it's about the government wanting to look like it's doing something. It's a feel-good measure, designed to placate our outrage, but not any sort of a real solution aimed at a real problem.


Anonymous rose said...

People seem to think that only the CEO and CFO of these banks make over $500k and so if they leave, so be it. Reality is that many at the top make more than this and banks like BofA now are in danger of losing a good amount of their top talent to non-TARP or foreign banks.

CEO's just want to keep their jobs, they don't care about $500k. But the people around them do.

As much as people may hate it, the decisions made at the top of BofA and Citigroup type banks affect all of us, affects our entire economy. And if talent starts flowing from these troubled banks we're all gonna pay for it.

It's bothersome that if we're on the precipice of a depression as Obama suggests, that he has Geithner worrying about such petty political non-sense.

3:32 PM  

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