Wednesday, June 10, 2009

Hysterics over executive pay proposals

AlphaNinja - People appear to be freaking out over the possibility of pay-caps of executives at ALL public companies, not just ones receiving bailout money:

apoplectic at TheStreet.com:

"President Obama should get the heck off Wall Street already. The government has no business assuming more power to set compensation guidelines for the financial sector. We're talking about negotiated agreements between private parties. We're talking about free enterprise. We're talking about the American Way!"

So far, the government has no plans to do such a thing, because they know the response to that would be utter chaos, and mass retirement among wealthy exec's who'd rather play golf all day earning 5% tax free (muni bonds) on their nest eggs than cap their salary at 1/10th of what it was a year earlier.

What they ARE suggesting is a "say on pay" bill, that would give the SEC power to give shareholders a nonbinding (meaningless) vote on executive compensation at companies in which they own stock. This is a waste of time - the majority of votes are already made by enormous institutional stockholders, who already have the ability to vote management out if they find practices not to their liking. It's a nice measure, but will be largely unimportant.

If people want to get up in arms about things, keep an eye on the new executive pay Special Master ("Special Masters, Car Czars?" - this isn't Russia, is it Danny?) Kenneth Feinberg, who's overly concerned with executive compensation at firms who've received taxpayer funds. Kenneth - how about you focus on making the taxpayer some MONEY, as opposed to populist rhetoric?

"Washington lawyer Kenneth Feinberg will be the Obama administration’s “special master” to review compensation at companies that get government bailout funds, White House press secretary Robert Gibbs said. Feinberg will have authority to review “the soundness, the appropriateness” of compensation for the top 100 executives of companies that received “exceptional assistance” through the Troubled Asset Relief Program, Gibbs said. The oversight will continue until the aid is paid back as a way “to protect the taxpayers,” he said.
“He has the ability to review the compensation structures and determine whether or not we believe they meet the criteria of being sound and appropriate rather than excessive,” Gibbs said."

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