Is he right or wrong? Obama's $500k salary cap

If the Gov. owns more than 50% of a business then they have the right to cap salaries... hire and fire too. After all, these are Gov. employees we are talking about.

I'm thinking 'right or wrong' may not be the best assessment of this proposal.

There certainly is a precedent where, in the past, Government has imposed restrictions on the recipients of taxpayer money ... highway funds and the 55 mph speed limit come to mind ... although those recipients were States rather than private companies but the principle remains the same.

But then there is the Free Enterprise argument of the Government not meddling in the affairs of private concerns beyond the constitutionally mandated regulations for trade, etc.

However, as to what I believe is the proper assessment ... will it actually accomplish anything ... economically?

Or is it largely symbolic and intended more to appease the increasing segment of the population that believes very high paid CEOs should somehow be punished.

Limiting exec comp is just so much BS window-dressing, purely for political consumption - won't do squat for you or me.  If anything, they should condition executive compensation on performance to give company execs some incentive to turn their outfits around.  'Course, the sooner outfits repay & are free of such conditions, the better for the execs so that's something of an incentive, too.  Seems silly to leave the same twits in charge & pay them less, though - there needs to be some serious deck-cleaning or nothing will have really changed.

jeez...first time in nearly 5 years i've found myself agreeing completely with anthony r.

OP fails here.... I think that BO knows how mad people were with the last bail out and trying to save face... but now BO is the knight in shining armor now because he did it... well duh...

I heard an interesting argument this morning on the radio pertaining to this particular topic and one of the commentators made a lot of sense with what he said.

While the idea of capping salaries does not sound like a great thing when it's the Gov't doing because what is to stop them from wanting to cap other things such as prices, quality and production but, in the end we can not forget that these businesses getting this money are getting it from us taxpayers and I think some restrictions should exist to avoid repeating history. But what I thought was even more interesting is that by adding restrictions, some really strong one, these businesses might actulally consider the idea of not taking this money (since in reality they are not being forced to take it) because all the restrictions are not worth it and they will have to do better at keeping their businesses alive on their own. The Wells Fargo Las Vegas trip and Citigroup $50 billion jetplane are proof of things they should not be doing, especially with taxpayers money, that could help keep them from going under and survive this down time without any need of assistance from the Gov't.

Basically, you do it on your own, the right way and hopefully survive; you do it under Gov't funds, you do it our way and hopefully survive. I would rather not give them money but since they think they can have their cake (our money) and eat it to (continue with unnecessary expenses), I say offer the money but with some major restrictions. One commentator actually said rather tha a $500,000 cap for executives, they should put a $1 cap, like the guys from auto industries were willing to do. 1 year won't kill them right?

Isn't half a million a year enough for anyone? Most gov. jobs do have a pay scale and these folks should be glad they aren't on it (nowhere near $.5M). If someone invents the better mouse trap that's one thing (let him make the cash), but for those basically punching the clock on the taxpayers dime, it should be capped. Know if he'd do something about the over-paid government employee's on the Hill, that would be something.

Take a look at what Barney Frank was proposing yesterday.  The ability for the government to expand salary caps on all companies!

http://www.financialweek.com/apps/pbcs.dll/article?AID=/20090203/REG/902039977/1003/TOC

Under normal circumstances the government should not be allowed to have a say in the matter, however once the companies took tax payer money the game should change.  Personally I think the bailouts should have been written in such a way that if a company takes money they agree to a minimum of a 12 month moritorium on bonuses, business paid vacations, etc.  Basically if you're going to take tax payer money then you have to give something up in return.  There should have been incentive to NOT take a government bailout rather than just sending out a bunch of checks with no strings attached.

Terp, I think most here are missing the cause of this problem. 

The board of directors for all large public companies determine what salaries are.  In my company the board are the one's that determine whether I get a bonus or not.  It seems to me that we are looking at the symptom and put a bandaid on it. 

Obama and others are talking about being "responsible" when it comes to these salaries of CEOs.  Why isn't anyone talking about replacing the board of directors, who agreed to a CEOs salary?  Why are they beating on the CEOs?  Unlike CEOs, congress gets to vote for their own raises.

With that said.....

If the government isn't smart enough to figure this out how can we expect them to wisely invest in struggling companies.  It seems they have a good record of finding ones that are mismanaging money (which would the reason why they are in their current state) and give them money.  Only later to complain that they are mismanaging tax payers money. 

The other problem is that the US's corporate tax is one of the highest in the world.  And we wonder why manufacturing businesses have moved out of country. 

Here is a good read LINK

This should be enough to waken a few?

He's right and wrong.

If you're taking bailout money from the government, then the government should have the right to tie any strings they want to it.

On the other hand, you're not going to find the best and brightest executives if you're paying them the same rate as low-end football players / baseball players or what many TV stars earn in a single episode...

Exactly!  Excellent points Adventure-Dude.

I think that is exactly it and everyone will suffer because what happened at Merrill Lynch (top execs immediately went elsewhere) is going to happen everywhere and there won't be anyone who knows what they're doing in charge.  That'll be great!

Considering Democrats are known to want to "please" the general public, if this were true then it only proves Democrats truly believe the average citizen is to naive to understand the complexities of Gov't policies and would never understand how complicated a simple set of words really is within a policy.

*steals play book from LW*

Do I get Karma? 

I don't agree with that. If a company isn't being a burden on the taxpayer, hands off.

I'd settle for competent. Some of those smart guys are too smart for anyone else's good.

They count on it. It may backfire as more people that previously could careless about politics take an interest.

I agree also with Anthony. 

The scary thing tho is the government is getting their fingers into too many projects.

The government  will as a result of all these bailouts "own" the banks and the top three car makers.  Where is this going?  As it is now, the government is becoming the biggest employer in many states. 

That is very scary to me. 

I guess that depends on their motivation. You're a successful CEO - wouldn't you enjoy the challenge of turning around a once-failing company? The prestige alone would guarantee a healthy salary for your next role.

Please tell me how it is 'stealing from the shareholders' when their salary is APPROVED by the board of directors?

Steven, aren't the Board elected by the stock holders?  Aren't the stockholders, stockholders in the company by choice?

Anyone who invests money in a business runs the risk of losing that money.  People invest in a company with the hope that the company moves in the right direction (as overseen by the BOD) and yields money back on their investment.  This risk is assumed when ANYONE invests.

The more savvy stock holders do their research on the company before blindly investing.

As an elected body (BOD) a stockholder can either sell off and decrease their influence or persue to buy more stocks to gain more influence on the direction of the company (through the BOD). 

If an investor doesn't take the time to research a company out before investing that is no longer ignorance but rather foolish.  They are WILLINGLY investing in a high risk fashion because of their failure to research. 

You are basically telling me to feel sorry for the poor schlub who is at the poker tables and is losing his money because he doesn't know anything about the game of poker? Not much different.

An idiot could have probably run the banks better than some of the most highly paid execs (since their low intelligence would have probably ruled out using any complex derivatives etc.), so the typical argument used in defence of high salaries (i.e. to get the best you have to pay the most) rings hollow after the mess they've caused.

If the government wants to cap the pay on bailed out banks etc., let them - at least it will act as a small incentive for directors to avoid needing to be bailed out. Also it's not like there are tonnes of jobs available in the investment banking sector at the moment, so I'd have thought quite a few people might just be glad at getting $500k for a mediocre job, rather than not having a job (due to the company failing in the absence of a bail out). Also as others have mentioned, turning around a failing company would do wonders for your future job prospects (and your own prestige), so there would be some reward there. Personally I think it would've been better if the government didn't have a bail out in the first place though - let the greedy execs lose their jobs, it's the very least that they deserve.

Jubak's take.

hell i'm all for long sentences and aggressive asset forfeitures for past wrongdoing but that ain't likely to happen.  any cap that can be implemented--even a far too generous $500k version--is better than nothing.  reducing the amount to the point where none of em could afford to commission loophole & workaround development teams would be much more effective.

What, I agree with Maudlin!?