dagblog - Comments for "Rich CEO Demands to be Taxed "

Then I'm not sure what we're

Orlando — Mon, 09 Feb 2009 14:08:44 +0000

Then I'm not sure what we're disagreeing on. The government doesn't (and shouldn't) have the right to tell private businesses how much to pay their employees and I agree that pay inequity is a problem. Government has a role to play in solving that problem, but through legislation like the Employee Free Choice Act and the Lilly Ledbetter Fair Pay Act, not through regulating salary levels.

But when they're taking bailout money, they need to act with austerity. If they're too far gone to realize it, the government has every right to lay out the conditions.

dang this cough medicine.

Bluesplashy — Mon, 09 Feb 2009 09:39:54 +0000

In reply to Over on TPM I thought you

dang this cough medicine. I'm still rather squeamish about government regulating pay beyond the bailouts.

First of all, i think it's

Deadman — Mon, 09 Feb 2009 06:52:49 +0000

In reply to I never argued against

First of all, i think it's obvious that a company that accepts government bailout money because it effed up MUST accept whatever conditions the government lays out.

I also agree however that the idea of limiting executive compensation for the top 5 managers for a limited period of time will do absolutely nothing to address the major structural issue, which is that the current system - which favors those in charge and makes shareholder activism very difficult - does not lead to rational compensation packages.

I think making this into an income inequality battle is unwise. That's a separate issue as far as I'm concerned. If investors truly came first, trust me, you just would not see these kind of obscene packages for underpeforming executives. Superstars would probably still get paid big bucks, and I'm not entirely sure they shouldn't if they truly are adding value (again, if you want to talk about the comparable value-add to society of a top executive compared to a top teacher, that's a valid and important discussion, but also a much different and much more ideological one).

There's an article on realmoney.com that talks about this in good detail (it's a pay site so I can't link). But you need to tie compensation to performance. Make sure the performance being judged is long term (at least 12 months, maybe longer). Give shareholders a say in pay and limit the rather ridiculous limits that Delaware incorporation rules place on shareholder activism. Stock options or restricted stock may be one of the best compensation tools, but you need to outlaw or extremely limit repriced options (certainly for management if not for the rank and file). Take a good hard look at the soundness of golden parachutes and huge severance packages.

The most obscene thing about the current mess is that billions of dollars were paid to people who were not creating value, but destroying it (and bringing down the country's economy at the same time).

We have the ability now to use the current crisis to address some of the structural problems with how companies compensate their top executives. If enough hue and cry is raised, many of the most egregious examples of unjustified compensation would hopefully go the way of the dodo.

You'd still get some bad decisions, just like in baseball, you still have your steinbrenners, but it wouldn't be as systemic a problem as it is now.

I never argued against

Michael Wolraich — Mon, 09 Feb 2009 05:19:58 +0000

In reply to My ancestors (German

I never argued against government bailout conditions. I just don't think it accomplishes much. The number of overpaid execs at bailed out companies is not very large. I'd far rather channel energy into longterm solutions to income inequality.

My ancestors (German

Orlando — Mon, 09 Feb 2009 04:56:00 +0000

In reply to Sorry for my own outburst.

My ancestors (German Mennonites) were quite oppressed as well, albeit not in an eradicate your race sort of way.

In this case, clarification accepted. And for the record, I would like to investigate pay inequity and I've been advocating for stronger labor unions for a while. I think that is the key to a healthy middle class and sanity in salaries at all levels. But in the meantime, while I cop to having moments of self-righteous indignation, I'm not sure this is one of them. If a company accepts taxpayer dollars, why shouldn't they have to accept government conditions on the money? We exact conditions from individuals who accept government assistance in the form of welfare. Expecting that corporations will know better than poor women how to responsibly spend the money they receive is a fairly odious assumption, I think.

Sorry for my own outburst.

Michael Wolraich — Mon, 09 Feb 2009 03:50:18 +0000

In reply to I can only speak for why my

Sorry for my own outburst. You're not the really the one who provoked my ire. I don't know why I bother posting anything provocative at TPM. I have a really strong aversion to screaming villagers with pitchforks. Perhaps because my ancestors were often at the receiving end of the pitchforks.

I can imagine that an

Michael Wolraich — Mon, 09 Feb 2009 03:30:00 +0000

In reply to I can only speak for why my

I can imagine that an argument that executives need such high pay and ridiculous bonuses might not be very convincing. But I've never read anyone stupid enough to argue that. Nor have I read anyone stupid enough to argue that executives should be getting big bonuses from taxpayers. What some argue, and what I've argued, is that there's a real market reason why executives have been able to negotiate such sweet deals for themselves, and any attempt to solve the issue that ignores the market pressure will certainly fail.

So here's the question: Do you want to shout your self-righteous indignation into the blogosphere, or do you want to investigate the causes and possible solutions to the pernicious effects of income inequality? Because the sound and fury surrounding the bonuses of a few executives at a few banks is a red herring. You could have these executives tarred, feathered, and bombarded with the angry little shitballs, but it would do nothing to change the value of your 401K, the state of the economy, or the atrociously wide income gap that bedevils the country.

I can only speak for why my

Orlando — Mon, 09 Feb 2009 02:47:18 +0000

In reply to Thanks Blue, it's a good

I can only speak for why my own knickers are in a twist. Rock stars and athletes don't ask the government for my money to fund their yearly bonuses or spa retreats (or hookers--anybody watch 20/20 on Friday?). They only get my money when I choose to buy a ticket.

Now, I know referring to the government bailout as "my money" is overly dramatic, but it doesn't make it less true. I willingly pay taxes so that our roads are paved, our schools are staffed, our country is protected from outside threats and for any number of other worthy reasons and programs. I do not, however, pay taxes willingly so that executives or anybody else working for a failing company gets a freaking bonus. Capitalism does not mean that when things are good you can get rich and when things go bad, you can stay rich because the government will support you.

I've heard lots of arguments for why they need such high pay and ridiculous bonuses, but they are about as convincing to me as Thune's picture of hundred dollar bills stacked into space.

Thanks Blue, it's a good

Michael Wolraich — Sun, 08 Feb 2009 21:47:00 +0000

In reply to Over on TPM I thought you

Thanks Blue, it's a good link, and I'm all for regulating shareholder approval of salaries. There is certainly some board abuse, and the poor incentive structures that DF and Deadman have mentioned seem particularly dumb for companies to accept.

But it's interesting to me that people get their knickers in a twist over rich CEOs but not rich rock stars or athletes. When a team buys an expensive contract for a player who doesn't deliver, people may criticize the owner and manager for stupidity, but they're unlikely to get really angry at them, and they're even less like to get angry at the player. I suspect that it's because CEOs are a lot more central in class conflicts, particularly when they battle with organized labor. But CEO performances at large corporations are likely to have larger financial consequences than top athlete performances.

Top government employees, such as the President and Cabinent members, are frankly underpaid in the sense that their performance has extreme financial consequences. But the government can get away with paying them what it does b/c there's no competition. It's not as if Obama can threaten to become president of Japan if the U.S. doesn't pay him more.

If we could somehow require all companies to pay their executives less, the system would still work, as it works in other countries and used to work here, because there would be no competition offering higher salaries. But my point is that it would be very difficult to enforce such a requirement b/c there are powerful market pressures boositng executive pay.

That's why I say tax, don't cap. And yes, let's close some of the loopholes.

Over on TPM I thought you

Bluesplashy — Sun, 08 Feb 2009 01:00:13 +0000

In reply to Rich CEO Demands to be Taxed

Over on TPM I thought you asked about Board control of CEO pay and the breakdown between. I did a little searching and found first this link

http://www.truthout.org/article/containing-ceo-pay-a-case-government-efficiency

quick and clear.

I also got a little confused about what decade i was in. Complaints about CEO overcompensation from the 90's mixed in with the 00's. But I did find a book preview on that had this quote

Core, Holthausen, and Larcker study provides evidence consistent with this prediction (... pay arrangements can be expected to be more favorable to the CEO when outside directors sit on multiple boards.) It indicates the CEO compensation increases, all else being equal, with the number of outside directors serving on 3 or more other boards ... CEO pay increases when a board contains interlocking directors.

That's from Pay without Performance

I guess you and Hastings are talking about Xtreme progressive taxation. And it is a way to handle the excesses in pay and redistribute the wealth. But aren't there always loopholes? I'm still rather squeamish but governement regulating pay beyond the bailouts.