Obama wants to control executive pay... for companies that did NOT get bailout???

[He Who Pawns]

WTF!!!!!!!!!!!!!

http://www.nytimes.com/2009/03/22/us/politics/22regulate.html



Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.

The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving federal bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.

Beyond the pay rules, officials said the regulatory plan is expected to call for a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

:eek::mad::mad:

[tremendoustie]

WTF!!!!!!!!!!!!!

http://www.nytimes.com/2009/03/22/us/politics/22regulate.html



:eek::mad::mad:

Yep, and this is the way it works ... the government slips a tentacle in, and pries the whole damn thing open.

It just seems to be happening in fast forward these days ...

[LandonCook]

Is anyone really shocked?

[Join The Paul Side]

Comrads! :eek:

[LibertyEagle]

So basically, they effectively nationalized the entire financial industry.

[pinkmandy]

I just saw this, too and posted it in the eco forum. Didn't see it here, sorry.

Wtf is this? :mad: Are we communist yet?

[AJ Antimony]

The only shocking part is how Bush and Obama never got shot at because of antics like this

[50calray]

http://i12.photobucket.com/albums/a212/SVORay/Forum%20picks/bailoutmascot.jpg

[MikeStanart]

http://i12.photobucket.com/albums/a212/SVORay/Forum%20picks/bailoutmascot.jpg

haha perfect!

[Dripping Rain]

communism has come in its ugly face. too bad most people wont see that or even care.

[He Who Pawns]

I wonder what these "changes" are to exec pay? Are they going to try to CAP exec pay at private and public firms that have not taken the bailout blood money?? I think there would be blood in streets if they dared to try that.

Or are these rules essentially just setting up regulations whereby the salaries have to be reported more transparently or whatever?

BTW, as many economists have pointed out, trying exec pay to short-term "profitability" marks is a complete disaster, because it causes the execs to fudge the books and sacrifice long-term earnings for cheap, damaging short-term gains. But that doesn't mean the government needs to "enforce" what is common sense.

[idiom]

A little bit more of this and Ron Paul will have all the support he needs.

[Battlecruiser]

Someone I know suggested that the government cap executive pay at a maximum of something like X (where x can equal 10) times the median worker's pay. While I don't like government interference in the market, if this regulation is applied equally to all companies, I don't think it would be unfair. I couldn't think of anything wrong with his suggestion.

The problem of executive pay has been bothering me lately. I never understood why CEOs should be making billions of dollars when they are not adding that much value to the company. The only reason the CEOs make that much is probably because they set their own salary and through stock options. In a perfectly competitive market, such companies with overpaid CEOs should fail. However, they do not because the market is not perfectly competitive. I think something is wrong in this world when engineers who are actually creating wealth in this world are only making around 100k while CEOs make millions without breaking a sweat.

[ItsTime]

Someone I know suggested that the government cap executive pay at a maximum of something like X (where x can equal 10) times the median worker's pay. While I don't like government interference in the market, if this regulation is applied equally to all companies, I don't think it would be unfair. I couldn't think of anything wrong with his suggestion.

The problem of executive pay has been bothering me lately. I never understood why CEOs should be making billions of dollars when they are not adding that much value to the company. The only reason the CEOs make that much is probably because they set their own salary and through stock options. In a perfectly competitive market, such companies with overpaid CEOs should fail. However, they do not because the market is not perfectly competitive. I think something is wrong in this world when engineers who are actually creating wealth in this world are only making around 100k while CEOs make millions without breaking a sweat.

What do you do for work?

So you think its ok for the government to reduce your pay and thats alright?

[tremendoustie]

Someone I know suggested that the government cap executive pay at a maximum of something like X (where x can equal 10) times the median worker's pay. While I don't like government interference in the market, if this regulation is applied equally to all companies, I don't think it would be unfair. I couldn't think of anything wrong with his suggestion.

The problem of executive pay has been bothering me lately. I never understood why CEOs should be making billions of dollars when they are not adding that much value to the company. The only reason the CEOs make that much is probably because they set their own salary and through stock options. In a perfectly competitive market, such companies with overpaid CEOs should fail. However, they do not because the market is not perfectly competitive. I think something is wrong in this world when engineers who are actually creating wealth in this world are only making around 100k while CEOs make millions without breaking a sweat.

Yes, something is wrong: Government is propping these companies up with stolen money, and enforcing predatory regulations. In a free market, these guys are run out of business by more efficient companies which do not offer such high bonuses.

We don't need more government tyranny to try to counteract the effects of the tyranny we've already got. We need to get rid of the tyranny.

How do you think this law would be applied, given that the politicians are all in the back pockets of these "businessmen" in the first place? That's right, to protect the businessmen, the same way regulations are used now.

Think of the government as the tool of corporatists and beaurocrats, and you'll understand a lot better why the problem, not the solution, is government power

[Original_Intent]

So basically, they effectively nationalized the entire financial industry.

Read it again, not ONLY the entire financial industry but ALL publicly traded companies!


Officials say the rules could also be applied more broadly to publicly traded companies,

[coyote_sprit]

http://i12.photobucket.com/albums/a212/SVORay/Forum%20picks/bailoutmascot.jpg

Atleast the condom does what it is supposed to do.

[idiom]

Publicly traded companies should have the share holders (the owners) should be able to control what goes on. Due to a giant pile of crap in current government regulation and corporate law, this rarely happens.

[coyote_sprit]

Publicly traded companies should have the share holders (the owners) should be able to control what goes on. Due to a giant pile of crap in current government regulation and corporate law, this rarely happens.

The government can invest your money more efficiently then you, they are just looking out for your well being.

[idiom]

The government can invest your money more efficiently then you, they are just looking out for your well being.

Publicy traded does not mean government owned.

[He Who Pawns]

Someone I know suggested that the government cap executive pay at a maximum of something like X (where x can equal 10) times the median worker's pay. While I don't like government interference in the market, if this regulation is applied equally to all companies, I don't think it would be unfair. I couldn't think of anything wrong with his suggestion.

The problem of executive pay has been bothering me lately. I never understood why CEOs should be making billions of dollars when they are not adding that much value to the company. The only reason the CEOs make that much is probably because they set their own salary and through stock options. In a perfectly competitive market, such companies with overpaid CEOs should fail. However, they do not because the market is not perfectly competitive. I think something is wrong in this world when engineers who are actually creating wealth in this world are only making around 100k while CEOs make millions without breaking a sweat.

Your points are valid, but it should not be the government that controls this. Public pressure can be brought to bear on these companies. Public scrutiny and outrage can be used to shame the CEOs and execs into taking a more equitable piece of the pie. Shareholders can also bring pressure.

If the companies choose to ignore the shame, they can be boycotted.

[angelatc]

Someone I know suggested that the government cap executive pay at a maximum of something like X (where x can equal 10) times the median worker's pay. While I don't like government interference in the market, if this regulation is applied equally to all companies, I don't think it would be unfair. I couldn't think of anything wrong with his suggestion.



Watch how fast Wall Street moves to Hong Kong.


http://www.ft.com/cms/s/0/4ff2f77e-1584-11de-b9a9-0000779fd2ac.html

Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.

There were fears that the backlash triggered by AIG’s payment of $165m in bonuses to executives responsible for losses that forced a $170bn taxpayer-funded rescue would have devastating consequences for the largest banks.

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”

The banker added: “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.” . . . . .

hat tip John Lott: http://johnrlott.blogspot.com/2009/03/scaring-financial-experts-out-of-us.html

[Battlecruiser]

Your points are valid, but it should not be the government that controls this. Public pressure can be brought to bear on these companies. Public scrutiny and outrage can be used to shame the CEOs and execs into taking a more equitable piece of the pie. Shareholders can also bring pressure.

If the companies choose to ignore the shame, they can be boycotted.
I doubt it. I wish that were the case. But once the CEOs lay their hands on the money, they don't care how much public outrage there is. They'll keep it. AIG's execs have been under fire on how they are using the money for a while now. A week after getting their bailout, executives at AIG took an ridiculously expensive vacation:

"AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges."

You would think that after that fiasco, AIG wouldn't have the gall to give 165 million in bonuses to these same executives. But they did.


Watch how fast Wall Street moves to Hong Kong.

To be quite honest, I would be happy if they left. Wall Street hasn't produced anything worthwhile in a very long time. It may have been useful when it was created in the 1700s but it sure isn't useful now. It's just a tool for people to get rich quick without doing work, and in the process, screw other people out of their money. And now they are a detriment to society, stealing tax payer money.
That's not to say that I don't understand why someone would want to work for wall Street firms. The number one recruiter for the the university I go to is a major i-bank that incidentally was bailed out. I was considering working for an i-bank. It wouldn't be hard for me to get a job there once I had a degree. But the only reason I was interested was for the money. Though my current major (engineering) has nothing to do with banking, I would have been paid much more than engineers get paid doing engineering work. If you look at all top engineering schools, most of their grads weren't become professional engineers. Many went into I-banking for the easy money.

[He Who Pawns]

Do not underestimate the power of outrage, scorn, and shame. It is what controlled human behavior for millenia.

[tremendoustie]

I doubt it. I wish that were the case. But once the CEOs lay their hands on the money, they don't care how much public outrage there is. They'll keep it. AIG's execs have been under fire on how they are using the money for a while now. A week after getting their bailout, executives at AIG took an ridiculously expensive vacation:

"AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges."

You would think that after that fiasco, AIG wouldn't have the gall to give 165 million in bonuses to these same executives. But they did.

If it were not for the government, these companies would be bankrupt and out of business -- in part, because of the very abusive bonus schemes you decry.

It is government which is enabling their absue. If it were not for government, more efficient, responsible firms would have taken over by now.

[Battlecruiser]

If it were not for the government, these companies would be bankrupt and out of business -- in part, because of the very abusive bonus schemes you decry.

It is government which is enabling their absue. If it were not for government, more efficient, responsible firms would have taken over by now.

That works for these financial companies. But what about other companies that are not getting bailed out, but the CEO makes far more money than the rest of the employees. The company would do better with the CEO making less money. But because the market is not perfectly competitive, there are no other companies that are willing to challenge them. And so, the CEO will take large bonuses, increase his pay, while stealing valuable capital from the company that could have been used to better the company. No one is going to do anything about it either. Because the CEO is the top dog. No one working for him is going to question him unless they want to risk getting fired, and everyone outside the company isn't interested.


In 2005 US CEOs were paid 465 times more than the average worker.
Is the CEO really doing the work of 465 people? I don't think so. Can he be easily replaced and can someone else do his job for far less? I would argue yes. There are far more difficult jobs that pay far less. It just doesn't make sense for a CEO to be paid this much.


So you think its ok for the government to reduce your pay and thats alright?

Like I said, I'm not normally for these types of things. But surely you see something is wrong when a CEO is making 465 times the pay of the average worker.

[He Who Pawns]

That works for these financial companies. But what about other companies that are not getting bailed out, but the CEO makes far more money than the rest of the employees. The company would do better with the CEO making less money. But because the market is not perfectly competitive, there are no other companies that are willing to challenge them. And so, the CEO will take large bonuses, increase his pay, while stealing valuable capital from the company that could have been used to better the company. No one is going to do anything about it either. Because the CEO is the top dog. No one working for him is going to question him unless they want to risk getting fired, and everyone outside the company isn't interested.


In 2005 US CEOs were paid 465 times more than the average worker.
Is the CEO really doing the work of 465 people? I don't think so. Can he be easily replaced and can someone else do his job for far less? I would argue yes. There are far more difficult jobs that pay far less. It just doesn't make sense for a CEO to be paid this much.

It is up to the business owner or shareholders to determine CEO pay. It might not seem "fair" to you that some people make a lot of money, but that's life. There are winners and losers. Do you think movie stars should be raking in 50 million dollars for a film? You probably don't like that either.. That's life.

I do think that shareholders of public companies should crack down hard on out-of-control executive pay. But that is far different than the government doing it.

[silverhawks]

A little bit more of this and Ron Paul will have all the support he needs.

A little more of this, and we won't have free speech or guns in the USA any more.

This is a VAST expansion of governmental power, all in the name of "protecting" the public from financial disaster. They have some nerve to suggest the Fed should take on oversight of large companies, when it doesn't accept oversight of itself.

[silverhawks]

Watch how fast Wall Street moves to Hong Kong.

That was one of the first thoughts I had...this is going to scare business out of the US, period.

What about a company that is on the verge of becoming publicly traded? Are they going to submit to massive levels of government oversight just because they're successful?

This is insane.

[angelatc]

To be quite honest, I would be happy if they left. Wall Street hasn't produced anything worthwhile in a very long time. It may have been useful when it was created in the 1700s but it sure isn't useful now. It's just a tool for people to get rich quick without doing work, and in the process, screw other people out of their money. And now they are a detriment to society, stealing tax payer money.


The bankers getting bailed out are actually on K Street, not Wall Street. They're not stealing money - we voted for the people who are giving it to them.

It's naive to think that we'd watch the talented earners and the money markets leave with nary a blip. The exodus would not end there. The producers will follow the money, as will the support staffers like engineers and marketing specialists.

[angelatc]

Like I said, I'm not normally for these types of things. But surely you see something is wrong when a CEO is making 465 times the pay of the average worker.

No, I do not see anything wrong. Class warfare is in the Marxist playbook, though.

Price caps create shortages. If you cap wages, skilled workers will move to other markets.

Making richer people poorer won't do anything to make poor people richer.

[Battlecruiser]

It is up to the business owner or shareholders to determine CEO pay. It might not seem "fair" to you that some people make a lot of money, but that's life. There are winners and losers. Do you think movie stars should be raking in 50 million dollars for a film? You probably don't like that either.. That's life.

I do think that shareholders of public companies should crack down hard on out-of-control executive pay. But that is far different than the government doing it.

You've got a point, but certainly when such things happen, doesn't it raise questions about the system these things are happening in?

But I have a hunch that intellectual monopolies granted by the government (Patents and copyrights) have a lot to do with the fact that movie stars are making 50 million dollars a film. And supply side taxes. Surely they have all contributed a lot to society. But I doubt it has been that much.

Should Bill O'Reilly really make 10 million dollars, far more than several neurosurgeons combined? Neurosurgeons have to study until the age of 33 until they can finally be professional physicians. They might make a million a year, if lucky, and to do that, they have to work insane hours (perhaps 20 hours a day or more).

[angelatc]

The company would do better with the CEO making less money.



That's a huge fallacy in your argument. Presumably, that CEO would not stay at that company if he was not receiving the fair market value of his skill set. So the company would be forced to hire someone with less skills, which would reduce efficiency and profitability.

Besides, money is not public property. If you do not like the fact that certain CEOs cut better deals with their employers than you cut with yours, then do not buy their stock or their products. Other than that, how is it really any of your business?

[tremendoustie]

That works for these financial companies. But what about other companies that are not getting bailed out, but the CEO makes far more money than the rest of the employees. The company would do better with the CEO making less money. But because the market is not perfectly competitive, there are no other companies that are willing to challenge them. And so, the CEO will take large bonuses, increase his pay, while stealing valuable capital from the company that could have been used to better the company. No one is going to do anything about it either. Because the CEO is the top dog. No one working for him is going to question him unless they want to risk getting fired, and everyone outside the company isn't interested.


In 2005 US CEOs were paid 465 times more than the average worker.
Is the CEO really doing the work of 465 people? I don't think so. Can he be easily replaced and can someone else do his job for far less? I would argue yes. There are far more difficult jobs that pay far less. It just doesn't make sense for a CEO to be paid this much.



Like I said, I'm not normally for these types of things. But surely you see something is wrong when a CEO is making 465 times the pay of the average worker.

There are only two reasons that a CEO would be paid that much.

1. He is actually worth it, because he is that much better than the alternatives. Possible, but unlikely.

2. The company is shielded from competition by government regulations. This is almost always the case.

Have you ever checked out the regulations government places on new businesses? It's absurd. Large corporations absolutely use their influence in government to place ridiculous burdens and taxes on potential competitors, while ensuring loopholes and special privileges for themselves. This is the only reason they can afford such excesses.

In a free market, with ease of entry, a business wasting money on undue bonuses to execs would quickly be driven out of business by a smaller, more efficient company. They are only protected by government.

You really need to understand, our government is corporatist. They and big business are nearly one and the same -- observe how quickly bureaucrats jump from wall street to DC and back again. What you're asking for is for the fox to guard the henhouse. It won't happen.

Unjustified large bonuses to execs mean that a company will have to compromise on salaries, prices, or quality. In a free market, this means being driven out of business. It is government that protects them.

[angelatc]

Should Bill O'Reilly really make 10 million dollars, far more than several neurosurgeons combined? Neurosurgeons have to study until the age of 33 until they can finally be professional physicians. They might make a million a year, if lucky, and to do that, they have to work insane hours (perhaps 20 hours a day or more).

Absolutely, because apparently O'Reilly generates more revenue for his employer than the neurosurgeons do.

[tremendoustie]

You've got a point, but certainly when such things happen, doesn't it raise questions about the system these things are happening in?

But I have a hunch that intellectual monopolies granted by the government (Patents and copyrights) have a lot to do with the fact that movie stars are making 50 million dollars a film. And supply side taxes. Surely they have all contributed a lot to society. But I doubt it has been that much.

Should Bill O'Reilly really make 10 million dollars, far more than several neurosurgeons combined? Neurosurgeons have to study until the age of 33 until they can finally be professional physicians. They might make a million a year, if lucky, and to do that, they have to work insane hours (perhaps 20 hours a day or more).

Who are you to decide what people should be paid? It is not your money.

[RonPaulR3VOLUTION]

"To quote John Stossel's new book, "Give Me A Break" (page 247-248):

"...do you want your boss to be someone like Ben or Jerry of Ben & Jerry's ice-cream company? Not long ago, they said they'd practice 'caring capitalism' —they'd limit how much their next CEO could make. 'How could you possibly justify somebody making $1 million or more a year when their line-level worker can't make enough to afford a house?' said cofounder Ben Cohen.

"Ben and Jerry announced that the highest-paid workers would make no more than five times what the lowest-paid workers got. People cheered. Employees sang, 'We second that emotion.'

"But it didn't work. Ben and Jerry weren't satisfied with the people who applied. They ended up hiring someone at a salary of not five times but 14 times more than other workers got. When he didn't work out, Ben and Jerry paid even more to hire another CEO. Then they sold the company.""

http://books.google.com/books?id=QYigzbozB9IC&pg=PA247&img=1&zoom=3&hl=en&ots=i6V6bFpJtb&sig=ACfU3U1higokS6BfuV5KVEqKXlGTK7WkUw&w=575

http://books.google.com/books?id=QYigzbozB9IC&pg=PA247&lpg=PA247&dq=ben+jerry%27s+stossel+limit+pay&source=bl&ots=i6V6bFpJtb&sig=XbbBsBxk6xyJXCssMVcOxjpQzuI&hl=en&ei=oeLFSdV6yoy2B8WHpcoK&sa=X&oi=book_result&resnum=1&ct=result

[Battlecruiser]

I am not deciding what people should be paid. I am merely commenting on what I perceive as a flaw in our society and wondering about a solution to fix that flaw.

I say flaw, because ideally, capitalism, through the market, should reward the most productive linearly (i.e. the more you work, the more you get paid, at a constant rate. If it weren't constant, it would be cheaper just to hire additional people).

However, from my experience, I can see that is not the case. The most productive are, in most cases, not the most rewarded.


2. The company is shielded from competition by government regulations. This is almost always the case.

This may be one of the reasons. And I don't doubt you are correct, but where can I see some of these regulations (especially in regards to banking and tech companies, but any sector is fine) so I may read about them myself?

Also, thank you for that page RonPaulR3VOLUTION. That is a very good counterexample to what my friend was suggesting.


The bankers getting bailed out are actually on K Street, not Wall Street. They're not stealing money - we voted for the people who are giving it to them.

It's naive to think that we'd watch the talented earners and the money markets leave with nary a blip. The exodus would not end there. The producers will follow the money, as will the support staffers like engineers and marketing specialists.

Well, the bankers have heavily lobbied (read: bribed) almost all politicians in D.C. They have most politicians in the bag. They knew they could count on these hacks because they had bought them. So it is stealing, only they are using a middleman as a scapegoat.

[angelatc]

"To quote John Stossel's new book, "Give Me A Break" (page 247-248):

"...do you want your boss to be someone like Ben or Jerry of Ben & Jerry's ice-cream company? Not long ago, they said they'd practice 'caring capitalism' —they'd limit how much their next CEO could make. 'How could you possibly justify somebody making $1 million or more a year when their line-level worker can't make enough to afford a house?' said cofounder Ben Cohen.

"Ben and Jerry announced that the highest-paid workers would make no more than five times what the lowest-paid workers got. People cheered. Employees sang, 'We second that emotion.'

"But it didn't work. Ben and Jerry weren't satisfied with the people who applied. They ended up hiring someone at a salary of not five times but 14 times more than other workers got. When he didn't work out, Ben and Jerry paid even more to hire another CEO. Then they sold the company.""

http://books.google.com/books?id=QYigzbozB9IC&pg=PA247&img=1&zoom=3&hl=en&ots=i6V6bFpJtb&sig=ACfU3U1higokS6BfuV5KVEqKXlGTK7WkUw&w=575

http://books.google.com/books?id=QYigzbozB9IC&pg=PA247&lpg=PA247&dq=ben+jerry%27s+stossel+limit+pay&source=bl&ots=i6V6bFpJtb&sig=XbbBsBxk6xyJXCssMVcOxjpQzuI&hl=en&ei=oeLFSdV6yoy2B8WHpcoK&sa=X&oi=book_result&resnum=1&ct=resultWhole Foods had the same problem. Their CEO had the same type of deal. But they had to keep raising his salary because they couldn't attract talent below the market rates.

[angelatc]

Well, the bankers have heavily lobbied (read: bribed) almost all politicians in D.C. They have most politicians in the bag. They knew they could count on these hacks because they had bought them. So it is stealing, only they are using a middleman as a scapegoat.

They did not bribe us into voting for them

[idiom]

Do not underestimate the power of outrage, scorn, and shame. It is what controlled human behavior for millenia.

You mean like the protests that stopped the invasion of Iraq?

Or the 9% approval rating of Congress that led to them all being replaced?

Or are you refering to the history of a parallel universe again?