Cut exec pay or government stay away?

Many readers of this blog have expressed outrage at the excesses of executive compensation.

But many readers also have expressed dismay over the amount of government intervention in the economy.

Now, those two views appear to be at odds with the latest news development.

The Obama administration will order the companies that received the most taxpayer bailout money to slash compensation to their highest-paid employees, the New York Times is reporting.

The plan, for the 25 top earners at seven companies that received exceptional help, will on average cut total compensation this year by about 50 percent, the Times said.

The companies are Citigroup, Bank of America, American International Group, General Motors, Chrysler and the financing arms of the two automakers.

What do you think of the government’s action?

Is it at odds with too much intervention? Or are these seven cases worthy of an exception?

For instant updates, follow me on Twitter.


82 comments Add your comment

Rick Cole

October 22nd, 2009
6:25 am

If you lay down with dogs you will get fleas. These banks took government money so the government can dictate terms. However, it should be a warning to all of us. Watching the government exercising control so abruptly and obviously politically give us all a glimpse of how they manage everything, including our health care. Do you want your politically incorrect disease or condition demonized, debated and defunded? What if you have AIDS? What if you have mental illness? Are obese? Or enjoy activities deemed unsafe? Beware of government intervention.

DCB

October 22nd, 2009
6:29 am

As a rule I’m not for government intervention in matters of controlling the free enterprise system. And that included the bailouts in the first place. But these are extreme times and the credibility of the government’s efforts to stabalize the country’s financial well-being are at stake. What I would hope will happen is that there will be some objective way of arriving at what the compensation of the top executives will be – such as correlating the amount of future pay to the performance of the company. This should also be true for the board member’s compensation for they are the ones responsible for the ridiculous compensation packages offered their executives in the first place.

Charlie

October 22nd, 2009
6:33 am

If, at the time the money was given, there were “no strings attached” then it is none of the governments damn business what they get paid. I might think that the pay is excessive but private companies are free to do what they think is best for their employees. Can you say…..SOCIALISM? We certainly don’t want that, do we? Oh, sorry…the Democrats DO want that!

Heather

October 22nd, 2009
6:56 am

I suppose its okay if this were China, Venezuela, Cuba, or any other socialist state.

Shadowman9

October 22nd, 2009
7:00 am

It’s taxpayer money bailing them out. It’s not crazy or “pinko” to have strings attached. Every loan you’ve ever taken had terms and conditions to insure you would pay back the money and limit the risk to the loaner. You also have terms limiting how you can spend money (ie – you can’t take out a car loan to remodel your house). Controls over how loan money is spent is not a new concept.

If you manage a company into the ground what the hell should you be rewarded that much for anyway? You pay talent for performance, and these CEOs are failures.

Nobody is coming after your paycheck, so drop the talking points.

Decatur Bubber

October 22nd, 2009
7:31 am

You bet this is government’s role! These birds took the American people down a path toward financial ruin with their many bizarre investment schemes, nearly destroyed our nation’s and the world’s economy, and wiped out a lot of individuals’ private investments. All this so they could pile their own material wealth higher and deeper. Then, when the house of cards collapsed, they turned to us lil’ ole taxpayers to bail them out, then they took a big hunk of that taxpayer-provided bail-out money to pay themselves outrageous bonuses! The gall and arrogance of this is beyond belief. For you to even have to ask the question “Is this government’s role” is astounding!

GBC

October 22nd, 2009
7:32 am

What are we to do? Its obvious that they are not policing themselves or have no intentions to do so. I have always felt as Americans we are our worst enemy. Thats why no other nations are threatening the USA. Because at our current pace, we will destroy ourselves. Our self hate within most Americans will fuel our divide & destruction. I feel that health care and education should be our primary focus. If all citizens could get a education beyond high school, I believe the USA would have a more common goal. The reason we are so at odds with each other is because the basic necessities are not balance. If every citizen (rich or poor) had the same healthcare service, then what would be the argument. If every child had a guarantee chance for a college education. What would be the argument. If all those basic needs are meet without any compromises, then I am all for true Capitalism. Our Politicians are too corrupt to allow any chance for reform. I was raised Democrat however, I share a lot of Rep views.

CurtisM

October 22nd, 2009
7:39 am

When the very idea of socialism is brought up concerning this question of government intervention, we already know the response with their typical tired dogma. Give it a rest will you? It’s old, it’s incorrect and it has absolutely nothing to do with socialism. Please get your facts straight, read about socialism, and then remember that it is your money, my money and our neighbor’s money that is helping prop up the banks and the financial industry. Even now as gas prices begin to rise, who is the culprit? Is it more socialism, is it Chavez, is it the Arabs, is it Obama? NO. It’s none of these. It is our friends on Wall Street! See how much a barrel of oil costs to manufacture, no wars to speak of, the usual unrest in the mid-east, yet somehow the barrel of oil keeps going up. It’s not vacation time, it’s not an oil baron president. So if you believe that banks and big business have your best interest at heart, think again.

Without the government stepping in (again and again), we will keep on losing. So many eyes and nay-sayers watching the government, who watches big-business as they stomp all over the American dream? Yes, our government.
Careful how you use the word socialism, it almost rhymes with big business.

Shadowman9… I agree.

Chris Pettigrew

October 22nd, 2009
7:43 am

Of course it is fine for the government to control everything. That makes life so much easier for me. I can my food stamp card, my check every month for setting on my duff and soon I will get my “free” health care. This will complete the circle, I can drive my government made car down to my government ran bank to cash my government check on the way to the government ran clinic. Yea! Yea! I have always wanted to live in North Korea and now I can without having to travel there. Go Government!

Joe McLain

October 22nd, 2009
7:50 am

NO, its not the governments role to cap salaries/bonuses/options. If a bank took money, the terms should have been given up front and I guarantee, they didn’t mention anything about salary caps. We need to stop being so small minded about this and start thinking that if the government can do this to an executive, who will be next?

War Jacket

October 22nd, 2009
7:56 am

If you belly up to the government trough for survival, you deserve what you get. These firms would have gone bust without taxpayer money, i.e. compensation would have gone to zero. If these executives don’t like the deserved cut in pay, then move on!!! Personally I am sick of witnessing the “private profit, social loss” paradigm in play now. Just look at Goldman, being able to borrow money at 0% interest from the Fed and then use it to back securitized life insurance instruments and other unregulated derivatives. They are printing profits, all enabled by easy access to taxpayer backed loans. It’s a joke and the joke is on the poor working stiffs that believe the “socialism” rants being concocted by the very same politicians they support. Wake up America!!!

AnnieR

October 22nd, 2009
7:59 am

I agree with Shadowman9…they took the money (our money as taxpayers) to bail out companies they mismanaged to the point where a bailout was needed. Why shouldn’t they have conditions attached, the management of those companies certainly don’t deserve any handsome rewards…some don’t deserve a reward at all and should probably be prosecuted!

But that is just THOSE companies, there are lots of other public and private companies that haven’t taken bailout money that are free to set the CEO compensation to whatever they want with no government intervention so what is all the big fuss about?

Dan

October 22nd, 2009
8:06 am

It is absolutely absurd, the lack of any economic insight on this blog is a great example of the kind of thinking that caused this mess. But I digress, these “bailouts” are loans, and anyone who bank or government who provides a loan should be able to monitor the procedings subsequent to the loan to ensure proper management.; A sweeping statement saying the top twenty five execs pay will be slashed is the height of stupidity and quite frankly a fine way to ensure the furthere demise of those companies meaning the loans won’t be repaid. But then that is probably the whole point

IC Atlanta

October 22nd, 2009
8:09 am

No it isn’t the government’s role to control executive pay within private organizations. If there were no strings attached to the loans or investment then certainly the government should not step in after the fact and require it. Also limiting these top executives to essentially mid-level manager pay is bound to doom these companies. Anyone worth their salt at this level can make much more money.

Wonder what the Mao Obama Czars make? I notice that Mao Obama now wants to step in and put money in smaller banks. Another step to control. Mark my words the Chairman will try to nationalize banks in the near future.

travelerguy

October 22nd, 2009
8:13 am

I find it odd when people complain that if there are salary caps, these talented, smart people will “brain drain” to other companies. Maybe it would be better for taxpayers’ money if they did leave — these are the same people that couldn’t accurately assess risk. And if they all do drain to other companies, what company will hire them? They walk into an interview somewhere and have to explain that they did such a horrible job at their last company, the company had to take government loans? Yeah, real talent there!

travelerguy

October 22nd, 2009
8:17 am

“A sweeping statement saying the top twenty five execs pay will be slashed is the height of stupidity and quite frankly a fine way to ensure the furthere demise of those companies meaning the loans won’t be repaid.”

@Dan: that’s cash salaries. They can get a TON of stocks, that they can’t cash in for 5 years … talk about MAJOR incentives to turn around a company, both for the tax payers and for their own wallets.

knox

October 22nd, 2009
8:32 am

HELLO PEOPLE: IF YOU ARE SO CONCERNED YOU SHOULD BE WRITING YOUR SENATORS AND CONGRESSMEN INSTEAD OF TO THE AJC. http://www.govtrack.us/congress/findyourreps.xpd

Noneya

October 22nd, 2009
8:34 am

OK….I just want to make sure I have this right…..we have some very struggling companies so we want to cut executive pay for most critical executives by 90%. I’m sure that will result in quite a few of them heading to those nice Japanese, Korean, and Chinese institutions without similar constraints leaving only those incompetent enough to get jobs elsewhere running our most critical financial institutions. Seems like a good recipe for a financial disaster. But I guess Obama knows what he’s doing…what with all that community organizing experience he has.

Noneya

October 22nd, 2009
8:35 am

Should have been incompetent enough to NOT get jobs above……incompetent typing here.

travelerguy

October 22nd, 2009
8:41 am

“I’m sure that will result in quite a few of them heading to those nice Japanese, Korean, and Chinese institutions without similar constraints leaving only those incompetent enough to get jobs elsewhere running our most critical financial institutions.”

@Noneya: and what, they’re going to go overseas and proudly tell the boards of those companies, “Yes, I completely destroyed my previous company to the point we needed government intervention. Yes, I was completely incompetent when it came to analyzing risk. But I promise I’m a good CEO, PROMISE! Please, PLEASE, give me a job!”

Dan

October 22nd, 2009
8:44 am

Sorry traveler guy they are talking about total compensation, and lets not forget much of their “failure at assessing risk” was due to government pressures to lower the standards in the name of political correctness. By far the biggest purveyors of risky loans were fanny and freddie, the quasi government entities. So why do we want the government to run anything else? (Much like medicaid being the worst insurer)

travelerguy

October 22nd, 2009
8:47 am

“they are talking about total compensation”

Dan, no, it’s salaries, not total compensation. The execs can be given millions of shares of stock — they just can’t cash them in for 5 years, providing them the incentive to work really well to raise share prices so they’ll be even more rich. Win for the execs, win for the other share holders.

Reality

October 22nd, 2009
8:50 am

Who would you rather be robbed by, big government or big business? When the republicans are in control big business robs us. When the democrats are in control big government robs us. Take your pick.

Nash TENN

October 22nd, 2009
9:08 am

They took the money to survive. The had to in order to stay afloat. If they did not take the money then they file bankruptcy and everyone gets nothing. Corporate executives should have stepped up and volunteered to cut their pay since earnings are down and they are reporting huge losses. They are still being paid millions of dollars so what’s wrong with taking a haircut when things are tight. If things are tight at home you make adjustments to keep your home, then make adjustments to keep your job. Stop the greed until you are able to get back to a sense of profitability. Some of these comments are just crazy and to hear the ignorance of you southern FOOLS just confirms that all of you should be buried alive!

real fan

October 22nd, 2009
9:16 am

What how fast these execs leave. Next step apointing execs to run the companies .Then Government takeover is complete . Hello to the motherland.

andy

October 22nd, 2009
9:32 am

Our country is turning more and more into a socialist regime than a capitalist republic. The government has too much on its plate right now. If we are not careful this country could fall into a larger hole than it is in now. With record spending, terrorism, and even the right to free speech being debated. If we keep spending this money we will pay for it later. Let the businesses and banks fail, then some one else will come in and buy them and turn them around, thats capitalism. As far as free speech, if a news channel right to broadcast its views is taken away becuase they are conservative, then we are headed down a path of dictatorship and not democracy.

theboogins

October 22nd, 2009
9:34 am

I love how the morons on the left like to get into someone else’s pocket. Let em’ try to control YOUR pay, I guess that would be different eh? It’s as if you think that since some mgmt guy gets a pay cut that your pay is going to go up. You wish, not gonna happen.

The Govt should have let these companies fail and let the market take care of how much they make. As much as I despise the big banks (Bank of Amigo the most) for their hideous lending practices, being run by Big Bro has to be far worse in the long run. The very notion that some govt flunky has the authority to determine anybody’s compensation is chilling.

Then again, maybe that same hack could look at congressional pay with an eye to curbing the excesses there.

Terry

October 22nd, 2009
9:38 am

1. US Government spends billions to bail out companies
2. Companies need to use the bailout money to turn their business around, for all shareholders including taxpayers.
3. US Government slashes pay of highest compensated employees, likely the most valuable employees in the company
4. Competitors to the bailed out companies seize the opportunity to steal those most valuable employees, whose compensation was just slashed.
5. Bailed out companies lose top talent, their competitors pick up the talent.
6. Success of bailout is handicapped. All shareholders end up losing.

Penny wise, pound foolish.

TU87

October 22nd, 2009
9:40 am

I hate government involvement in private corporations – let the free market decide success or failure. But if these companies are going to take the money then they are going to have to do what the government says. Pay back the money like Goldman Sachs did and they can go back to running there own show.

Josh

October 22nd, 2009
9:41 am

So what happens when those top execs realize they can get paid far better at other companies? They LEAVE for those other companies – and then the corporations running on our bailout money truly do fail, and the taxpayers are left in the lurch. Genius.

Suburban Mom

October 22nd, 2009
9:41 am

Dear mom,

Thanks for giving me a weekly allowance although I continue to get bad grades, cut class, don’t clean my room, play computer games until the early morning hours, and take recreational drugs!!! You are the best mom in the world for not regulating….oops…..I mean monitoring and punishing my actions.

HereWithaPurpose

October 22nd, 2009
9:42 am

I say cut the pay. Who cares if they leave. They just move out the way for someone else to step in and possibly do a better job than they did. And maybe a paycut will motivate them to pay back the taxpayers quicker. Just like with the credit cards now. They are raising interest rates to obscene heights. That motivate a customer to try to back that loaned money more quickly. I know it does me. If they come to the american people for a loan, they have to deal with the consequences of their actions.

just a question

October 22nd, 2009
9:43 am

What law did congress pass giving the government (executive branch) the authority to set compensation?

If there is not a law on the books, then no matter your opinion of the pay, having the government set it is not legal…

HereWithaPurpose

October 22nd, 2009
9:47 am

@Just a question. There probably isn’t a law on the books but that doesn’t mean there isn’t something included in the small print on the loan documents when these companies took the loan granting the government to do something just like this.

Wendell

October 22nd, 2009
9:53 am

Thank you King Obama. Thank you for letting me have other people’s money to buy my health care. Thank you for letting me have other people’s money to buy my food (and rims and cell phone and beer). I can’t believe that so many people are foolish enough to get up and actually WORK every day when they could be getting all of this for free! From the Government and Heir Obama!!

So what if in exchange we must let the government control the media, the banks, the auto industry, healtch care? After all, it’s a small price to pay in exchange for doing nothing all day but waiting on my checks from King Obama.

Who says there is anything wrong with “spreading the wealth around?”

Everyone should be on Welfare/Obamacare!

Chris

October 22nd, 2009
9:57 am

Once again we see proof of how you can’t trust the government. One little known factoid to the Pay VZar taking away 90% of these top execs compansation is that itis written in that these execx can simply QUIT their jobs or retire. They MUST accept this deal AND keep working. THAT is NOT the American I thought I lived in…Thought we had gotten rid of slavery, but it is baaack!

Chris

October 22nd, 2009
9:58 am

Once again we see proof of how you can’t trust the government. One little known factoid to the Pay CZar taking away 90% of these top execs compensation is that it is written in that these execs can not simply QUIT their jobs or retire. They MUST accept this deal AND keep working. THAT is NOT the American I thought I lived in…Thought we had gotten rid of slavery, but it is baaack!

Whatever

October 22nd, 2009
9:59 am

It amazes me how many of you scream “Socialism” now about bailing out Wall Street, but when Bush bailed out Wall Street (and the Airline industry after 9/11) it was seen as something necessary to keep the economy afloat. So let me get this straight, its ok for the previous administration to burn through taxpayer money fighting a needless war in Iraq, not finding the mastermind of the 9/11 attacks in Afghanistan because of Iraq, bailing out Airlines (who pretty soon plan on charging passengers to go to the bathroom) and Wall Street Executives who drove their companies into the ground along with our economy, as well as doing nothing to stop the speculation in the Oil Markets that drove our gas prices to $5 a gallon, but it is not ok for the American Taxpayer to demand universal healthcare or demand that the tax dollars that are forcibly taken from us all to stay within the counrty? If a company took tax money to stay alive then it is their responsibility to pay the american taxpayer back as fast as possible, especially if they turn a profit. They are not entitled to large compensation. Maybe you people screaming “Socialism” will look at it like this – you get upset when you hear of people abusing welfare and living life up on the hog using taxpayer money, especially when they have the ability to do the right thing and choose not to. All of the sudden when it is “White Collar Welfare” it is perfectly OK to do whatever they want because these executives live a life of “entitlement”? I wonder how you all would be reacting if McCain had been given this huge pile of dung known as our economy and ended up doing similar steps – it would be back to the days of “Stand behind your President. If you don’t you are free to leave” YOU ARE ALL HYPOCRITES!

Chris

October 22nd, 2009
10:02 am

To “Whatever”…When will you get tired of the mantra…”It’s all Bush’s fault!” That is so old….

Whatever

October 22nd, 2009
10:04 am

Hey Chris, remind me again where the Executive bailout package came from? All of you act as if it was Obama that did it. Blaming the current administration is JUST AS OLD! But I guess the truth hurts, huh?

Chris

October 22nd, 2009
10:06 am

God has the power and right to force his beliefs on us and yet made us free, the government has not that right, and yet seeks to wield that power over every aspect of our lives. – Thomas Jefferson

As true today as when Jefferson spoke them 230+ years ago.

HereWithaPurpose

October 22nd, 2009
10:06 am

@Whatever. I agree.

Chris

October 22nd, 2009
10:08 am

“Whatever” not sure what posts of mine you are reading…BUT I have not “blamed” any administrations…Just commented on the facts.

Brent

October 22nd, 2009
10:08 am

If you take my money, I SET THE RULES. So it’s ok to some of you that someone, borrow big money from you and take it and pass it out to their buddies and tell you- you’ll get your money when we get ready. No one is going to let that happen to them. If you borrow my money, you don’t have money for bonuses, until you pay me my money.

Whatever

October 22nd, 2009
10:08 am

And if Obama leaves office and everything is just as bad as it is now (or worse) I’ll be calling him out as well. Has nothing to do with party lines or affiliations. The middle class suffered the worst this decade. The Wall Street Bailout was under the Bush administration – but I am sorry to remind you of that. Its not a mantra when it is the truth.

Chris

October 22nd, 2009
10:13 am

Brent…as an example…If I take your money..and your rules say pay me back in a month…Is it fair to CHANGE your rules after one week and say screw you, pay me NOW!

Whatever

October 22nd, 2009
10:16 am

All human situations have their inconveniences. We feel those of the present but neither see nor feel those of the future; and hence we often make troublesome changes without amendment, and frequently for the worse.

Benjamin Franklin
I too can quote words spoken hundreds of years ago, and can claim this statement can apply to the Wall Street Bailout. Maybe those companies should have failed, but I didn’t get a vote on that, nor did you – and god forbid that I speak TRUTHFULLY about where the Wall Street bailout came from.

HereWithaPurpose

October 22nd, 2009
10:19 am

@Chris. I know you weren’t talking to me but you speak on “fair”. Was it fair that the american people had to bail out these “talented executives” and these companies to prevent the economic collapse of this nation. And they can continue to enjoy huge bonuses at the expense of same said taxpayers, when many of us had to take pay cuts, furloughs, and job loss. Is that fair to us. When the majority of the people who can least afford it, help prop up companies and their executives with their failing performances can reap huge rewards. That’s not fair.

Whatever

October 22nd, 2009
10:21 am

“Brent…as an example…If I take your money..and your rules say pay me back in a month…Is it fair to CHANGE your rules after one week and say screw you, pay me NOW!”

Credit Card companies do that, as do Banks and Financial Institutions that took taxpayer money. Maybe a taste of their own medicine will give a little perspective to why Joe Taxpayer is so pissed at this situation.

Brent

October 22nd, 2009
10:22 am

Again Chris, you have no money for bonuses, if you haven’t paid me back my money. We on this blog have no idea what the lawyers and govt. officials put in the paperwork they exchanged with these companies. People are talking on this blog like they have the contracts in front of them. I can’t believe that you aren’t troubled by someone taking your money and paying bonuses, before they pay back the taxpayers. Just my opinion -it’s insane. It seems you are arguing against your own interest. This is corporate welfare.