Comments on: CEO Salary Caps: Drawing the Line

By: JohnG

JohnG — Thu, 12 Mar 2009 08:51:07 +0000

I thought the main point was that the people in the stable banks are also getting salary capped for accepting money that the Fed forced them to take in the first place.

By: Brian Knapp

Brian Knapp — Wed, 11 Mar 2009 20:25:10 +0000

Probably the obvious reason is that we want to de-incentivize company leaders from taking public money. And I don't want my bank to get comfortable with the idea of "running like a university."

Of course, an easy way of doing that is to not give them money. But, whatever, too late for that.

By: Dave Schuler

Dave Schuler — Wed, 11 Mar 2009 20:24:27 +0000

Isn't the obvious answer that they receive what's politically supportable?

You can't appeal to the market in either of these cases: the market's been suspended, they're working outside the marketplace. Without a price discovery mechanism we have no idea what the actual worth of these people's services might be.

I find it pretty remarkable when, for example, university presidents make a “comparable worth” argument for their salaries. Its answer is always the same: says who?

By: odograph

odograph — Wed, 11 Mar 2009 20:23:28 +0000

I think the general punditry are missing a bet by not tying this to the top marginal rate discussion.

If you don't want government picking winners (losers?) then you want a general rule to prevent excessive short-term compensation.

By: PD Shaw

PD Shaw — Wed, 11 Mar 2009 20:22:10 +0000

I'm not convinced. We are giving money to banks to serve a public good; we are trying to avoid a meltdown of the economy. We've also decided that $500,000 is more than enough compensation for a CEO and it would be a waste of taxpayer dollars to give money to a company that paid more.

We give money to universities to serve a public good, the education of our citizens. We could just as easily determine that $500,000 is more than enough compensation and that it would be a waste of taxpayer dollars to give more.

I think the real difference is that the bank cap is intended to punish the banks; and we are not currently seeking to punish the schools for selling diplomas with exaggerated value.