Issue: Economic: Outrageous corporate compensation

[Bryan]

A poster geddesman asked a series of questions for Dr. Paul supporters here:
http://abcnews.go.com/WN/Politics/comments?type=story&id=3239034

He wrote "I keep hearing how GREAT Ron Paul is, but I'm not hearing any details as to why he is so great? I know he's pro life and voted against the war, but that doesn't make him great by any stretch of the imagination."

This is one of the issues listed: Where does Dr. Paul stand on outrageous corporate compensation?

Can we help him out?

[Bradley in DC]

Compensation should be determined by the shareholders (and possibly creditors, if applicable). That said, corporate hot shots often take advantage of the relative lack of competition that government regulations impose. Fed Staff Study 171 (I think off the top of my head) details a survey of studies showing how government regulations have a disproportionately harsh burden on smaller institutions and act as a barrier to new entrants into the marketplace. The effects of which are to insulate larger, corporate interests that consolidate unnaturally their share of the market which is reflected in the disproportionate compensation.

[Brandybuck]

I'm fairly certain Ron Paul is in favor of shareholders and the directors they elect to set whatever compensation they want, without government interference. If it's not my money they're throwing on the bonfire, it's none of my business.

[drinkbleach]

This is something I've thought about a lot. Corporate compensation is determined by the shareholders. Unfortunately it's a private enterprise so the government can't really do a whole lot about it. The shareholders justify the payments by saying it's hard to find true talent. That excuse is bullshit. While I'd love to see the corporate compensation packages come down out of the stratosphere there's really nothing that can be done. Hopefully the managers just price themselves out of the market.

[Gee]

Reducing regulation increases competition, which would lead to execs tightening their belts. Also, eliminating federal contracts (defense spending, corporate subsidies, whatever) would probably have the same effect. Remember that many government-funded projects are basically legalized monopolies, which basically lets execs pay themselves whatever they feel like. The free market does not allow that.

[Bradley in DC]

This is something I've thought about a lot. Corporate compensation is determined by the shareholders. Unfortunately it's a private enterprise so the government can't really do a whole lot about it. The shareholders justify the payments by saying it's hard to find true talent. That excuse is bullshit. While I'd love to see the corporate compensation packages come down out of the stratosphere there's really nothing that can be done. Hopefully the managers just price themselves out of the market.

Yup.

There seems to be the beginning of a shareholder revolt holding corporate compensation packages under greater scrutiny. I think we're going to be in for an era of mutual fund manager regulation. Again, though, government policies that inhibit competition and new entrants in the marketplace, shelter the corporate elite.

[Gary]

Oddly enough, executive compensation is an issue in which the free market has not done a very good job of keeping in check. Setting aside government regulations that serve to help the big companies (and my belief is that it does not help that much overall, big companies are successful if they leverage their buying power, and there are plenty of counter-examples of big companies getting beat bad by smaller ones) it is a well-documented fact that executive pay rarely corresponds to corporate success.

Perhaps the root issue is that executive pay is largely determined by the corporate board of directors, who themselves are executives at other companies. Further, the board nominates new board members, keeping corporate boards a "members only" crowd. Which board member would want to supress executive pay overall, when it might ultimately hurt their own pay as well?

I don't propose a good solution, but if there is one out there, it will involve tearing down corporate structure as we know it. All the tweaking that has been going on has done no real good to date. (Most of the tweaking coming from government regulation).