Executive Compensation… looks like the bail out plan is not so critical
So how critical is this? apparently its not very critical if exec compensation is on the line.
Treasury Secretary Henry Paulson stressed that time was critical to get the proposal passed and that changes to the administration’s measure, which was sent to lawmakers on Saturday, could delay that approval, further unsettling global financial markets, which have already seen a number of stomach-churning days as the result of the biggest upheaval on Wall Street since the Great Depression.
I agree with John McCain on this one…
“I notice at Lehman … some $2.5 billion in compensation,” McCain said. “If they’re bankrupt, where did they get that? But the major point is that no CEO of any corporation or business that is bailed out by us, that is rescued by American tax dollars, should receive any more than the highest paid person in the federal government.”
“If we design it so it’s punitive and institutions aren’t going to participate, this won’t work the way we need it to work,”
Granted, $400,000 is a paltry sum when it comes to executive compensation, and even more so, when the numbers are this large. However, for the most part, these are the guys who ran things into the ground. They can either choose to take a huge paycut, be replaced…. or maybe govt intervention is not really that important to their firm.
Now, some would say, putting a low bid exec in charge is not so good… on the other hand, the high dollar execs have failed in a huge way. I think such restrictions on compensation are a reasonable risk to take, but apart from that. If indeed a govt bailout is needed, the execs compensation in this case is not so much the salary, but the ability to salvage what remains or even grow their investment. Congress should hold fast to this one… its not unlike playing Chicken. If this is the right move, and it is the right time, and it needs to be done quickly, then it will happen. If not, the markets will decide… and if it ends up it is really super time critical, the markets will decide likely way before legislation is ready to roll anyhow.
I’d also gather there is some level of patriotism on Wall Street…. some execs will step forward irrespective of the pay issue, and thats to say nothing of the intangibles and networking for the future that occurs. Its not unlike when a high school buddy who after graduating Harvard clerked for the supreme court, rather than jumping into the big bucks right away. One cannot readily set a price on such, its just too valuable.
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Comment by greene — September 26, 2008 @ 4:47 am