Bailouts and Executive Pay

February 4th, 2009

There really isn’t much we can do about it.  The economy is in a mess, and like sheep being urged toward the edge of a cliff, we’re being assured that the only answer is a bailout so massive as to be incomprehensible.  Hundreds of billions of dollars, for sure.  All that cash squeezed from the pockets of American taxpayers is being given to banks, Wall Street investment firms, auto makers, insurance companies, and assorted others standing in line with their hands out.  But some of that huge amount includes tax cuts, they say.  And we’ll make some profit from parts of it when it’s repaid with interest.  So they say. 

Economists of one stripe or another offer stupefying stacks of data to prove that one approach or another is the way to go.  I don’t think they understand it themselves.  Some invoke Keynes, others mutter about Hayek, still others grumble that the economy is best left to right itself.  Us common folk can be forgiven for wishing a pox on all their houses.

Meanwhile, liberals who tend to dislike and distrust business anyway see the crisis as a backdoor way to buy the government into control of big business.  They aren’t deep enough to understand that the workers whose votes they covet don’t know squat about running businesses, and they’ll listen to unions before they’ll give the time of day to hated captains of industry.  Having caused a big part of the problem by insisting on home loans being given to people who can’t repay them, now liberals propose to put out fires they helped start by throwing taxpayer money into the flames.  That’s OK, though; now they’ll be able to order the auto industry to produce junky little enviro-friendly cars that even they themselves wouldn’t buy.  That’s for all the rest of us, you understand.  And Congress being what it is, the bailout legislation gives them another opportunity to squeeze in more taxpayer money for their favorite wackadoodle liberal causes.

Conservatives aren’t any better, of course.  Having been hustled out of power by liberals, they have no idea what to do next.  They’re completely fractured and leaderless.  They think they believe in the free market, and many think the bailouts are a waste of money.  Far as they can tell, the best answer is to let the economy correct itself.  It’s a Darwinian process.  The weakest and least adaptable perish, and the stronger survive and flourish.  Something like that, and they’ve got their own economists with numbers and charts and Laughing curves to prove it.  And whatever we do, lets have very little regulation of business and the economy.  Leave it to the Masters of the Universe.  They’ll fly off to some lush resort in their luxurious private jets, take a refreshing shower behind a $600 shower curtain, and figure the whole thing out.

To paraphrase the great Howard Beale from “Network,” I’m mad as hell, and I’m…well, I don’t know.  Nothing I can do, really.  Like virtually everyone else spouting off on the subject, I have no idea what to do about the economic crisis.  Neither does Congress or the community organizer emeritus in the White House.  And don’t bother checking with his predecessor; he doesn’t have a clue, either.

So where does that leave us?  Well, we can moan loudly about the compensation and perks of the CEOs and executives that maybe got us here, that’s what we can do!  Liberals love it because it gives them a chance to publicly humiliate executives in hearings.  Never mind that these executives have more talent in their little fingers than these Congresspersons and Senators have in their whole bodies.  Conservatives are relieved that they can focus on pay and perks instead of dealing with part of the real problem–the fact that their beloved free market has all of its legs in the air. 

So, what about executive compensation?  Are these people paid too much, what with their salaries, bonuses, stock options, lavish perks, and, for all I know, Wal-Mart gift certificates?  Of course they are.  In 2000, CEOs in the S&P 500 got 525 times the salary of average workers.  In 2007, it was 344 times the pay of typical American workers.  How to put this in perspective…let’s see: in the Army, regular military compensation for the most senior four-star general is $215,895; for the lowest-ranking private, it’s $32,568.  That’s a ratio of about 7:1.  Sounds reasonable to me, especially considering that the four-star general has at least as much talent and far more responsibility that the average CEO, and the private has at least as much talent and far more integrity than the average politician.

President Obama, in an interview with CNN’s Anderson Cooper on February 3, said that the levels of executive compensation and bonuses in bailed-out companies “infuriates the public.”  I agree; it certainly infuriates me to see businesspersons slurping up my tax dollars and then giving each other huge bonuses.  Senator Claire McCaskill, D-MO, is also outraged over executive compensation.  She’s so outraged, in fact, that she’s introduced the Cap Executive Officer Pay Act of 2009.  This act would prohibit any employee of a company receiving bailout money from being paid compensation greater than the $400,000 annual salary of the president of the United States.  Great symbolism, but confusing.  The president’s total compensation, with salary and all perks now and for the future is probably at least $10 million a year, if it could be calculated.  But she would link executive total compensation to just the president’s salary.  And, of course, businesspersons being way smarter than the average member of Congress, they’ll figure out a way to get around that limitation.  Anyway, I like Senator McCaskill’s spirit.

If all this worries you because you don’t understand what the heck is going on, take heart.  Your leaders don’t know much more than you do, but they’re going to crack down on the pay these bosses are getting and take their fancy jets away from them, by gum!  Feel better now?

(This article was also posted at Centerfield.)

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One Response to “Bailouts and Executive Pay”

  1. doris |

    No, not really. I certainly don’t know the answer, either, but I think we ought to let them go it alone, without our tax dollars. That is the true meaning of free interprise, you screw up, you go under. Why is it different now? Because a lot of businesses are doing badly, but the bailout money will be putting good money after bad…. Dr.Phil said the answer to a money problem isn’t money, it’s your spending habits. More money will just go where the last money went–bye-bye, and that’s taxpayers’ money, not theirs. As everyone knows, if you didn’t earn your Mama’s money, you will blow it and not care on what.

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