Brother, Can You Spare 5 Million Dimes?

Posted on Thursday, February 5, 2009 by Frank Roche

Could you get by on a $500,000 annual salary? For many, that’s a laugh. For others who work in the the C-Suite, it’s a laugh, alright. Or maybe a cry.

President Obama was all over the news yesterday talking about executive compensation for companies that receive TARP funds. Get a bailout; limit exec comp. It’s that simple. If the government bails out a company, named executives will have their salaries capped at $500,000. If they get equity, it has to be restricted stock, and must include a provision that the TARP loans be paid in full before the restrictions are lifted.

I’m sure many of my friends in exec comp are blowing a blood vessel today. They’re seeking shelter in Adam Smith grottoes and lighting candles to the free market. They’re right — for companies that are participating in the free market. We’ve done everything but nationalize banks in this country, and that sure as hell isn’t a free market.

People will gripe about how you won’t get the best talent at $500K. I say, $50 million pay packages were supposed to get the best talent at some of those financial services companies. How’d that work out? Maybe I’d be happy to have TARP-funded companies run by execs who think $500,000 is plenty of pay. We could do worse. We already have.

User Comments

jtramsay

Feb 5th, 2009

I like what you're saying here. The Greenspan era would've made Gilded Age tycoons blush. Sure, this is political theater, but if something can lessen the record gulf between the average worker and executive pay, I'll take it.
Frank

Feb 5th, 2009

J.T., I like the free market, but what happened with some of those financial services companies is nuts. The incentives were wrong and there was no regulation. I think the time is right for a little sensibility. Let's go with that.
jtramsay

Feb 5th, 2009

There's a great opinion piece on nytimes.com today, Timothy Egan's “Boo Hoo in the Boardroom.” I think it captures the mood quite nicely.
Frank

Feb 5th, 2009

I just had a look at that on my train ride in. Nicely said. Egan thinks there are some people who will take the job at $500K. I would.
PeachFlambe

Feb 6th, 2009

I am an exec comp practitioner who once worked in financial services, and left in part because of the unbridled greed. I am as outraged as the next guy about the excesses of Wall Street. But I don't think the government is qualified to set limits on executive pay. The latest from Washington is a $400k cap including stock, deferred comp, retirement, etc. Don't get me wrong, $400k is a lot of money…but not when other companies who are not getting a bailout can pay 10 times that. So what will happen? The best talent will leave the troubled companies as fast as they can. And good luck getting any new, qualified talent to come in and turn these businesses around. And it's the thousands of people in the rank and file in those companies that are going to lose in the long run.
hrwithballs

Feb 7th, 2009

Whooaah there. Hang on a minute Peach. The government is completely qualified and has every right to limit executive pay in these companies where the executives have fucked up. These guys should think themselves lucky because a)they still have a job and b) they dont have to pay back the excesses they creamed off for themselves. You said it yourself “because of the unbridled greed.”

And please lets not start spouting the myth about talent going elsewhere. You forget that the talent in any organisation resides in the rank and file, not in the boardroom. If nothing else it would force us to look outside the usual places for talented people who could turn a company round. I know quite a few and none are earning anywhere near $500k.

Its time for a major shift in thinking. Pass round the 9mm's – its time for a cull.
Frank

Feb 7th, 2009

I think the difficulty in this whole mix is that the 350 companies who already got TARP money are not subject to the restrictions. How that makes any sense, I don't know. And I just heard an analysis of the TARP that went into financial services so far…we will only get 62 cents on the dollar. We should have just nationalized those banks…bought them. Then the workers could be on GS levels. I'm pretty sure we got a great deal with Barack Obama at $400,000 a year.

You make a good point about the rank-and-file. It's always them who pay. And it's scary. I felt a sock in the gut when I saw the jobs number yesterday. 598,000 more out of work. Wow.