Pharmaceutical companies, health insurance companies, public utilities, airlines, oil companies, defense contractors; I’m betting someone could make the case to limit or otherwise control executive salaries in all these industries because in one way or the other they affect the public interest with little in the way of competition for the end consumer. While there is no question that there are overpaid executives and that many pay for performance schemes reward for less than stellar performance or create the wrong incentives, what’s new?
The precedent of the federal government setting pay limits and determining the form of compensation is not a good idea. In the current scenario, we are told that a large part of compensation will be in the form of stock. It seems to me that rewarding in the form of stock creates strong incentives to keep the price of stock high and growing. Do the terms insider trading, backdating options, fudged earnings reports ring a bell?
Undoubtedly, many Americans are cheering this move by government. After all, who doesn’t want to get even with the guys who created a financial meltdown? The way a person is compensated may be relevant to the avoiding unwise risk, how much a person is paid is quite another matter. The rationale for limiting pay for those organizations who received government money as a bailout is questionable, who doesn’t receive a bailout from the federal government?
If you take $8,000 to buy a new home, should the federal government tell you what kind of changes to make to the home? If you take a bail out to buy a new car, should the federal government tell you where to buy your auto insurance?
I know, I know it’s not the same, a ridicules comparison, oh really? We are heading down a slipper slope that may feel good now, but has serious implications for the future especially in the hands of politicians who are experts at rationalizing.
I think a college education costs too much and has been rising at twice or more the rate of inflation, are professors and college presidents paid too much? Who holds them accountable?