The CBC published an article today on Obama's plans to cap the compensation packages for executives of companies receiving bailout aid.
Under Obama’s plan, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000 US. If they receive any additional compensation in the form of stock, it can’t be cashed in until taxpayers are paid back.This brings a few thoughts to mind. First, how did Obama decide that $500,000 US is the right number? What is the real value of attracting top-level managerial talent? I know many balk at the $130,000 salaries we pay Canadian MPs, but given their high task, I've often thought we do well to double them. Given the impact of the decisions made, don't we want to draw in our best and brightest?
If top dollar execs do actually bring a return thanks to better management, and if boards actually offer a measure of accountability, should there be a cap on the rate we'd pay if there is a net gain overall? And with the bailout in mind, will we see the sharpest leaders in companies who are suffering take better compensation elsewhere and leave potentially lesser hands to the hard tasks that face us? Is Obama creating a brain drain in recession ground zero? With CEO turnover rates already high, will this just make things more unstable?
Ottawa Brian, I'd especially love to hear your thoughts on this.
6 comments:
I didn't think of it that way; but I think that's a rather good point. Now is maybe the worst time to put caps on bringing in the best. We should be pulling out all the stops.
At any rate the move struck me more as so much political gloss, ushering in that new era of fiscal responsibility - than as a real substantive gesture to recession recovery.
It'd be fun to draft a "political gloss" index. Make a website where policy announcements are evaluated using three simple metrics along with a cheeky description. Maybe three different scores: politics, policy, and paparazzi (if it's just an attempt to get press/save face).
While I believe less is more when it comes to government intervention, on this issue I wholeheartedly agree that income and perks should be limited for those who participate in the bailout until the money has been repaid. A good start but It's time to do more. How about the stocks and other options that could easily add up to millions of dollars?
The problem though is who in the world will you ever find to take those low paying, high risk top dog jobs? Especially in cases where the CEO's and management that made some of these decisions are already out, who are we keeping responsible?
I believe the article mentioned limitations on stocks/options, as well as other perks.
If compensation packages are then that strictly tightened they would be paid a potentially uncompetitive rate until the recession ends (which could be a year to ten years from now - depending on who you listen to). If CEOs turn over every 3-5 years in good times, I'm curious to see what this will look like.
It would also be interesting to look at compensation in industries with heavy government subsidy (outside of recession) and see how executive remuneration is handled there. This is not the first time corporate America has seen swaths of government money. I think it's more a PR job than an measure of accountability.
Congratulations, we just got our first political commentator troll!
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