This is old, but I still want to write about it. In the lead up to the bailout bill, executive compensation caught fire as an issue. It’s something shiny because the numbers can be large. It’s also convenient because it enables partisans to avoid the complex discussion of causes and factors that might implicate them as part of the problem. From Ezra Klein (via Andrew Sullivan.):
One quick point on the bailout negotiations: The Democrats are making a big deal over limits on executive compensation. Such limits are nice, but in the context of this crisis, utterly meaningless. If Democrats extract concessions such that CEOs can be paid a lot of money rather than an obscene sum of money, but are unable to add provisions protecting homeowners, they will have lost, and lost badly.. Limits to executive compensation are a feel-good provision with little real world relevance or impact, and while it would be nice to have them in the bill, no one should be fooled into thinking them a high-level priority, nor believing that a compromise where compensation limits feature as a key Democratic boast suggests anything other than a total collapse in the negotiations.
This is why I’m not a partisan. I can’t (correctly) dismiss a provision as little more than a quest for happy feelings and then suggest that the provision should be in the legislation anyway because I want those happy feelings. There are real principles and, more importantly, real people involved.
In Mr. Klein’s defense, that isn’t quite enough evidence to support my argument, nor am I implicating him beyond that sentiment. Rather, nonsensical rhetoric from Senator Obama on the proposals then under consideration is a perfect example. (Mr. Klein sourced this without a link, which I tracked down.)
First, the plan must include protections to ensure that taxpayer dollars are not used to further reward the bad behavior of irresponsible CEOs on Wall Street. There has been talk that some CEOs may refuse to cooperate with this plan if they have to forgo multi-million-dollar salaries. I cannot imagine a position more selfish and greedy at a time of national crisis. And I would like to speak directly to those CEOs right now: Do not make that mistake. You are stewards for workers and communities all across our country who have put their trust in you. With the enormous rewards you have reaped come responsibilities, and we expect and demand that you to live up to them. This plan cannot be a welfare program for Wall Street executives.
This is collectivist crap. Executives are stewards for the shareholders. Their responsibility is to run the business according to the goals of the owners, which is presumably to earn profit. Sometimes this goes badly. The owners should learn to write better compensation contracts for the future if they dislike their current results.
The political side is irrelevant, but Congress doesn’t think so. Where contracts exist, including for excessive subjective adjective compensation, government has a responsibility to honor the binding nature for all parties (i.e. not the politicians). Where politicians don’t like the contracts they’re buying, they should not buy the contracts. (They shouldn’t buy them, regardless. I’m sticking with the bailout line of reasoning.) Bitching that J. Dom Pérignon should suffer to make Joe Six-Pack feel better is obscene. If you need your schadenfreude, don’t bail J. Dom Pérignon out of his mess.
I’d question why we can’t agree on this, but I realize that punishing J. Dom Pérignon is more about implementing more regulation. The happy feelings are the bonus.