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Ethics in compensation… February 4, 2009

Posted by neoavatara in Politics.
Tags: , , , ,


The Obama Administration has decided to limit executive pay to $500,000, including bonuses, for any company that takes money from TARP or any future bailouts.   Clearly, the huge golden parachutes that were seen on Wall Street, not to mention $18 billion this year in a bad economy, gave them plenty of ammunition to make this move.

But let us put this into perspective.  There are literally thousands of people on Wall Street that make more than $500,000, and most are not what you would call ‘top executives’.  Are they worth that money?  I have no idea.  But I can tell you that they are the driving force in many of these companies, and they will think twice about staying when they may be able to make more money across the street at a competing firm.

The question is what is the real goal. It will absolutely stifle the pay structure on Wall Street, where a bulk of pay is tied to bonuses.  But more importantly, it will be interesting to see if top management companies will be able to keep top flight talent in house.  And it shall be interesting to see if competition arises between those taking bailout money and those that don’t, which could further weaken those who are already teetering on insolvency.

And with all of the criticism of executive pay, bonuses, and perks, it is interesting to see hypocrisy with the Democratic Party.  Apparently the House Democratic Caucus spent $500k of taxpayer money.  On Thursday, Democrats will head to the Kingsmill Resort and Spa in historic Williamsburg, Va., for the three-day planning powwow. The resort boasts multiple championship golf courses, a full-service spa and six restaurants.  Democratic leadership sources were reluctant to talk about any aspect of the trip, but they defended it as an important planning session for the entire country. Of course, I am sure that business executives say the same thing.

Additionally, I wonder if they will ever link Congressional compensation to success.  Of course, that would be unthinkable…they would never get paid.  Ever.



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