$500k Salary Cap

[LivingAlmostLarge]

What is the problem with capping the salary of executives of banks/companies who want bailout money to $500k?

What is the issue? Those guys drove the companies into the ground and took outrageous compensation.

I am totally for the cap. And yes I don't think $500k is a lot of money in NYC. But why should they keep getting more?

I'm for the bailout and very liberal. But if you want to be "bailed" out why should it be a free handout for the "rich" in this case but there are more rules in place for welfare, food stamps, etc?

[JBinKC]

I am too its about time the bozos have a fiduciary responsibility to all of their shareholders and not those who have been appointed to the club (directors).

25 years ago the average CEO pay gap was 40 times the average workers salary now its 450 times and the place where I used to work it was 1200 times.


Personally, I think the bailout was handled totally wrong. When the first TARP funds went out they should have concurrently come up with the generous tax credit for existing housing they just recently proposed while there still was some confidence remaining in the job sector.

Now that tax credit will benefit fewer people as more of them are deemed unsuitable to carry a mortgage given employment risk.

[bjl584]

I just worry that the government may not stop here. If they can say how much a banker on wallstreet is allowed to be paid, how long will it be before the government madates how much you or I are allowed to be paid? How long will it be before the government mandates how many assets or how much net worth someone is allowed to have? I know that sounds conspiratorial, but liberty is often lost using the death by a thousand slices tactic.

One argument that I can think of against limiting salaries would be, if you limit salaries, then you will limit your talent. If you pay lackluster salary, then you will get lackluster people and performance which will only perpetuate your poor performance and problems.

[boosami]

This cap is worthless, and will do nothing. The cap is for salary, but companies will just give alternate compensation like stock. The execs will still be paid to the tune of millions of dollars, just in a different form.

There are already a handful of execs out there who take $1 salaries, receiving stock instead of cash. In fact, it's a better tax position to be in so this cap is going to have those execs paying less taxes in the long run.

This is a political move to appeal to middle America.

[Broken Arrow]

Boosami went straight for the jugular, but that's basically it.

I heard a radio interview that suggests another problem, which is that it could cause a brain drain on some of the best and brightest execs towards more private companies. I don't know how much I would buy into that, but when it's all said and done, I do support the salary cap. It may be a political message, but it's an important one to make:

Please use our tax dollars wisely.

Sure, there might be some brain drain, and there might be some loopholes being exploited, but in the end, at least the message is being sent.

[boosami]

Originally Posted by Broken Arrow

Please use our tax dollars wisely.

I agree fully. There need to be strings attached with bailout money. A salary cap might look good on paper and in the media, but it's a bandaid for a serious wound.

[EEinNJ]

Salary limits is a nice idea, making it stick is another matter. Just like putting "Buy American" clauses in. Then other countries and global businesses that want a piece of the action start complaining. When you follow the money trail, you see who is really going to benefit, and it won't be John Q. Public. This is why the Fed is keeping the TARP funds secret, and the trillions going to China, etc. I give Obama credit for the principals, but we're being sold out.

[wincrasher]

The cap will probably do nothing.

I'd feel better if the industry's best were working at the firms getting TARP money so they could figure a way to pay it back.

The real benefit to the public is the demand that salaries, stock, perks, etc are fully disclosed. The market will control the excesses if they are out in the light of day.

Another thing to do is simply make the excessive compensation and perks of public companies not to be tax deductable as a business expense. The shareholders will decide if it's still worth it to pay so much.

[GREENBACK]

I don't disagree with a cap on earnings in this specific case(because of the taxpayer money being used). What troubles me is the fact that the money was given out with not much thought to how it would be used even by some banks that actually didn't even need bailout money. They get these banks on the hook for the loans they gave then they start pulling their strings. I don't know if this is the first step towards nationalizing our major banking systems but it sure looks suspiciously like it.

[reptile411]

I could have run those companies into the ground twice as fast for half the price and saved our tax payers billions. Vote for my in 2012 lol.

[kork13]

Originally Posted by boosami

This cap is worthless, and will do nothing. The cap is for salary, but companies will just give alternate compensation like stock. The execs will still be paid to the tune of millions of dollars, just in a different form.

There are already a handful of execs out there who take $1 salaries, receiving stock instead of cash. In fact, it's a better tax position to be in so this cap is going to have those execs paying less taxes in the long run.

This is a political move to appeal to middle America.

Bravo. You hit my sentiment exactly, so I'll simply say "I AGREE!"

[pearlieq]

Valid points about alternative compensation aside, I still disagree with the salary limit on it's principles. I think it's short-sighted pandering.

I would be fine with an organization wide salary cap or a mandate for a salary average of 500k, but I think it's dumb to put a unilateral cap on the firms.

At this time more than ever, these troubled banks need to be able to attract and retain the best and the brightest. For non-industry specific positions, like strategists, planners, lawyers, accountants, etc. they have no incentive to work for financial institutions when they can jump to another firms with no salary limits.

If there is a hard limit of 500k on every position, firms are going to have to make do, in some positions, with people who are willing to work for less than market rate. Which means they're also probably not the cream of the crop.

Odd as it may sound, there are still people working at these banks who are smart and good at their jobs and worth premium compensation. It's better for everyone if they have a reason to stay.

A cap on average salary would accomplish the aims of both overseers and firms. They would be free to attract and reward top talent while still being accountable for keeping compensation reasonable while taking bailout money.

[neatdesign]

Here's the irony in all of this:

The banks played around with their customers' money and the customers lost out big-time. They lost their savings, their retirement funds, their college funds, even their homes. Some customers get a double-whammy and lose their jobs as well. Meanwhile, prices are going up and income and benefits are sinking.

What do the banks' customers do? They tighten their belts. They HAVE to -- they have no other choice. They cut back and downsize as best they can, because that's what they have to do to survive.

The banks have tanked and nearly bottomed out. They ask the taxpayers -- their customers -- for money to help bail them out. The government says, "Sure, here's some money to help you get things going again -- but your executives' salaries are capped at $500k/year."

The executives whine and say, "Hey wait a minute, I've got a lifestyle to maintain here! How am I supposed to pay my $8k/month mortgage if I'm only earning $500k/year!?!? What about my yacht? And how will I be able to afford the $600/month payments for my daughter's new Porche? This is OUTRAGEOUS -- how DARE you cap my salary!!!"

Welcome to my world, bank executives. You caused this mess, and now you're complaining because you, like everyone else, has to learn to live more frugally. Sucks, doesn't it?

~ Jenney

[marshall99d]

banks are 50% to blame, but so are consumers... accepting astronomical loans without a shred of common sense telling them they couldn't afford it. I hope both sides learn a valuable lesson.

[boosami]

Originally Posted by marshall99d

banks are 50% to blame, but so are consumers... accepting astronomical loans without a shred of common sense telling them they couldn't afford it. I hope both sides learn a valuable lesson.

It's the fault of a whole chain of people and organizations, greedy enough to continually look the other way when things seemed too good to be true.

[neatdesign]

Originally Posted by marshall99d

banks are 50% to blame, but so are consumers... accepting astronomical loans without a shred of common sense telling them they couldn't afford it. I hope both sides learn a valuable lesson.

I agree -- and I think that consumers have DEFINITELY learned that lesson now. Losing your house and/or a huge chunk of your savings practically overnight can do that.

The problem is that the banks haven't learned this lesson. Several of them were planning on using bailout money to attend or host lavish conferences -- and only canceled their plans because the government found out about it and raised a (justifiable) stink. And what about when they used $18 billion of the first bailout money to give year-end bonuses to people who helped cause this mess in the first place?

I agree that the $500k salary cap is probably more symbolic than anything. But maybe it'll help the banks understand just how drastically they need to change their practices.

~ Jenney

[My English Castle]

They've instituted rules about giving people stock instead of compensation. It won't be super simple to get around the rules, but I'm sure if we're worried about a "brain drain" these rocket scientists will figure out a way.

It's the old privatize profits, socialize risk crap again. I spent a decade in the brokerage industry, and their tolerance for cheating everybody and anybody is jawdropping.

[LivingAlmostLarge]

brain drain? Where are these guys going? Companies doing well enough will to not take bailout money will keep their CEOs. Companies taking bailout money and the CEO quits, where is he going to go?

[rizzmo]

It was the smartest and brightest talent that got us into this mess. Is it really so bad if they leave to mess up things in the private sector.

[cicy33]

I just want to know where it ends. First banks and now car makers. Where do we draw the line and say, Hey you screwed up and your company is over. Other companies have closed, why didn't they get any money? See? oh yeah, and where's MINE??? REPTILE, you got my vote! lol