Two recent quotes. One from Neal Boortz, one from DHinMI of Daily Kos. Can you tell which reads like it’s borrowed from the Cliff Notes of Atlas Shrugged? Which makes more sense?
These new rules are certain to do two things. First, as I explained earlier this week, the new rules will make it tough for these financial institutions to recruit or to keep the executive talent they so badly need to turn their companies around so that they can once again become profitable. As these rules loom on the horizon you be assured that many of the top executives in these companies are looking to bail – and head to industries where the government isn’t limiting their compensation. Secondly, people wallowing in wealth envy will think that this is just wonderful .. those evil rich people are getting just what they deserved .. and Democrats will gain their undying loyalty.
But, that already happened, at a much higher rate of compensation. Remember, it was the guys making $20 million and more per year who created this mess.
So, what’s required to get competent managers in these positions? Remember that McCaskill pegged her maximum CEO salary to the salary of the President of the United States. Are we to believe that a CEO making $20 million per year is 50 times more impressive and talented than the President of the United States? (OK, granted, the answer to that question is different today than it was three weeks ago.) And are we to believe that the only reason anyone does a job, in particular these high profile, very powerful jobs, is for the money?
The idea that money is the only reason anyone would take over the reins of Citi or Wells Fargo or General Motors is, of course, crazy. Sure, there are some who only do those jobs for the money. But that’s not who we need right now. We need people who will do the jobs because they care about the companies, are up for the challenge, and realize that if they can do a good job now, that they’ll make a ton of money later on.
The people who got those financial services companies in trouble were for the most part people who didn’t understand risk as well as you should expect of people in those positions—they allowed their companies to be wagered over obscure credit default swaps and derivatives that the CEO’s themselves often didn’t understand—and who didn’t take on any significant personal risk. They got paid exorbitant salaries, even more extravagant benefits and stock options, and then when their companies got in trouble, they were bailed out by us, the taxpayers. And then they still got bonuses.
They privatized success—good things were supposedly because the Masters of the Universe were brilliant, so therefore they should get tons of money—and they socialized failure—the problems were “systemic,” in spite of the brilliance of the Masters of the Universe, and because it supposedly wasn’t their fault, the execs of the failed financial services companies should still get tons of money. Or so they (and the boards of these companies) thought.
The CEO’s have reaped much of the rewards, but have been exposed to little or none of the risk. It’s time for that to change.
What we need now are heads of those corporations who will personally take on the risk that comes with a high profile job where your salary will be, as long as you’re being bailed out by the American taxpayer, capped at “only” $500,000 per year. We need people like that so that they understand risk, both organizationally and personally, that they’re exposed to the the level of personal risk comparable to the risk to which they expose their companies. Furthermore, just as the taxpayers are investing in these companies and want them to succeed for the long-term benefits to the country, the CEO’s of these distressed companies should be making decisions about the long-term health of the company, the long-term interests of the investors in the company—the taxpayers—and their own long-term success, not a single year payout.
Ok.. I guess I have to put the links in there… Great Orange Satan, … Somebody’s Got to Say It, Even if it Doesn’t Make Much Sense.