Today, President Obama announced that top executives’ pay at companies accepting TARP funds would be capped at $500,000, with any additional compensation coming only in the form of stock options that could not be cashed until the government had been repaid.
As news of the plan leaked last night, wealthy Wall Street went into panic mode, insisting that the caps would ruin the financial industry.
Folks, the financial industry is a scrap heap right now. Yet, the money quotes, so to speak, pour in, showing that these folks are not only tone deaf to public opinion, but also clueless about the fact that the current crop of CEOs might just bear a bit of responsibility for the forty-mile derailment that is the train-wreck of our economy.
“If I didn’t pay [bonuses], the people were going to go. … These people didn’t choose to cure cancer. These people didn’t choose to do public service work…These people chose to make money.” [Jack Welch, former CEO of General Electric]
“The consequences of it are going to be a massive brain drain of senior talent from those companies that have taken TARP money to those companies that have not.” [Donald Straszheim, managing principal at Straszheim Global Advisor]
“Companies that need the most talented people to fix their problems won’t be able to pay them.” [Jamie Dimon, JPMorgan Chase & Co. Chief Executive Officer]
Yesterday, financial writer Roger Lowenstein was on National Public Radio's "Morning Edition", addressing this very issue (couldn't find a written transcript, story about 4:30 long). Lowenstein calls the pay of huge amounts amount of money for failure as "infuriating". Lowenstein also calls for administrative rules, such as requiring stockholder approval for any compensation package above a particular limit. On the current crop of CEOs, he says, "I don't know how you could envision a class [of CEOs} that has performed worse than the current class has." In other words, these people are afraid to face the consequences of their shepherding of the banking and financial products industry to the brink of oblivion.
While I will admit I'm a bit uncomfortable with the kind of government regulation that would set salary caps for anyone, it seems to me the kind of whining going on here shows a peculiar lack of awareness, not only for the public's outrage over private companies getting huge amounts of what can only be described as welfare even as average folks struggle to make their mortgage payments, but for the reality that, while the Bush Administration certainly has much to answer for by creating an atmosphere in which bad and stupid people made many bad and stupid decisions that led to our current mess, the CEOs, especially of our financial industry, also bear more than a modicum of responsibility, and should be a little more humble. Americans are pretty fair-minded people; they believe if you get paid a whole lot of money, it might be nice to actually have done something to earn it.