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Curbing executive pay
Is Obama’s $500,000 pay cap good policy or populist meddling?
 

What happened
President Obama is unveiling a compensation cap of $500,000 for top executives at companies that take large amounts of federal bailout money. The rule, which is not retroactive, also prohibits CEOs from receiving most bonuses. “If the taxpayers are helping you, then you have certain responsibilities to not be living high on the hog,” Obama said Tuesday night. (The New York Times)

What the commentators said
The “large bonuses following large bailouts” created “an understandable (and large) amount of anger,” said Conor Clarke in The Atlantic online. But Obama’s salary cap won’t help. Affected companies will find other ways to pay their executives, and, if they can't, they'll lose skilled leaders to competitors. There “is not an infinite number of talented executives.”

American CEOs are “highly skilled,” said Deb Cupples in Buck Naked Politics, but mostly “at rationalizing the funneling of shareholder dollars to themselves,” in good times and bad. Last year the average U.S. CEO earned 400 times more than a non-managerial worker, compared with 28 times in Britain and 17 times in Japan. The main flaw in Obama’s cap is that it still lets other CEOs legally “loot companies and essentially rob shareholders.”

Obama’s actions could impact those CEOs, too, said Michael Mandel in BusinessWeek online. Just as President Reagan’s 1981 decision to fire the striking air traffic controllers made strike-breaking more acceptable in the private sector, “if Obama chooses to make an example of highly paid financial executives,” shareholders and boards will have an easier time challenging “multimillion-dollar pay packages.”

Obama is right to impose the pay cap, said Nicole Gelinas in National Review Online, but the federal government shouldn’t be in the position to do so. Obama’s goal should be to sell off the taxpayer-supported companies’ “salvageable assets to new private owners as quickly as practicable, even at fire-sale prices.”

 

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