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So, you really can’t manage on half a million?
By Lauren | February 9, 2009
It’s been disheartening to read news reports that Wall Street’s compensation gurus are already looking for ways around the cap that President Obama would like to impose on some bank executives’ compensation. The proposal isn’t exactly hard-hearted. If a bank is in shaky enough condition to partake of federal bailout money, the President has proposed that its top executives would make no more than $500,000 a year, with any additional compensation to come in the form of stock. If, on the other hand, a bank was healthy enough to forego federal bailout funds, it could pay executives whatever salaries its Board was willing to approve, no matter how extravagant.
The President’s proposal probably looks pretty generous to most Americans. After all, the average U.S. household makes less than one-tenth of the proposed half-million dollar annual limit. Nonetheless, Wall Street’s compensation experts are wringing their hands, gnashing their teeth and warning that, if the President’s limits are put in place, bank executives may well pull up stakes and move to more lucrative positions.
Why do those executives even think they could find new jobs, much less better paying ones?
Last time I checked, running your business into the ground was a firing offense, not a reason to demand a higher salary. We’re not talking about successful business people here, but executives who mismanaged their banks to the point where they had to ask for billions in handouts from American taxpayers (many of whom would faint dead away if offered half a million dollars once in a lifetime, much less in a year). These folks are lucky to be employed at all. That they have the chutzpah to complain about receiving, Heaven forbid, a mere half-million dollars a year boggles the mind. You blew it, folks - have a little humility, okay? Oh, and if you really can’t manage on a mere half-million dollars a year, don’t just demand more money. Roll up your sleeves and earn it, like everybody else.
Topics: Business Ethics, corporate responsibility, ethics |
February 16th, 2009 at 1:51 pm
Lauren,
I have considerable empathy with your viewpoint here - Wall Street execs who ran their banks into the ground at the expense of American taxpayers can hardly complain about this, and furthermore, they would have a considerable challenge in explaining to Barak Obama, why they should be paid millions when he, the CEO of the most influential country on planet earth, is prepared to perform his duties for $400,000.
That said, there is some risk that the new limits will hinder the ability of affected institutions to attract the top talent, which in turn may cost the American taxpayer in terms of reduced investment returns given that the degree to which the taxpayers are now financially exposed to the fortunes of these entities.
February 23rd, 2009 at 5:16 pm
I am in complete agreement with your position in this compensation issue. Like you said, “running your business into the ground was a firing offense, not a reason to demand a higher salary.” I was doing some research on the web, and I came across the Stakeholder Theory. Allow me to share it here with you. The stakeholder theory is a business ethics theory that addresses the morals and values in managing an organization. In general, it suggests that when making decisions, whether major or minor decisions, companies should consider the interests of its stakeholders – that is, the interests of individuals who have invested in the fortunes of the company. If we adhere to this theory, all taxpayers are now stakeholders of companies which received bailout funds from the government. Those top executives who are compensated with the bailout funds should be reporting to the taxpayers. And by demanding for more compensation, they are being irresponsible and inconsiderate with the interests of their companies’ stakeholders.
Without a doubt, those top executives whose morals are blinded by attaining the greatest possible financial rewards should be heavily criticized. And I agree to Obama’s $500,000 mandatory salary cap proposal. However, I suggest Obama to make amendments to the proposal. As with the current proposal, a $500,000 mandatory salary cap for top executives might put pressure on the recruitment of talented individuals that are capable to lead corporations out of the financial crisis. In addition, potential investors might be reluctant to lay their money on corporations without a sound management team. This in turn, transfers the pressure to taxpayers, as the government continues to bailout companies with funds from taxpayers. I believe executives should be rewarded by success, possibly in financial terms. Hopefully, the economy turns around soon enough, and my suggestion is that those executives who have the ability to rescue their firms out from the turmoil should be rewarded with a certain percentage of the company profit, while the rest goes to repaying taxpayers. This sounds more like a fair deal, right?