Is it OK for the US government to cap executive compensation or not?After the announcement of Obama's plan to cap senior executive pay in the companies that received bailout money, the bloggers, along with the rest of the public, are divided. Many think this is the ethical thing to do since it's unacceptable to use public money to pay exorbitant compensation to people who, by virtue of their risk-laden business, have generated a severe global recession. Others think it's outrageous to allow government to interfere in such unprecedented way in corporate affairs.
While more inclined to stand with the salary cap supporters, I'm still hesitant. And not because I feel sorry for the bonuses that executives might forgo. Public money helped them keep their jobs, so they are much better off than the millions of already and soon-to-be unemployed. The reason I'm hesitant is because this is bad news for New York City. It is well-known that Wall Street bonuses helped make the City a very nice place to live: clean, safe, with plenty affordable services, public and private, great food and vibrant cultural life. The City thrived on those high salaries and bonuses. Today, the City budget is already severely strained. The City people are gloomy. The City businesses are hurting.
Therefore, I will agree with Hugo Lindgren of New York Magazine who thinks that, although our first instinct is to punish the Wall Street moneymakers, such actions might be counterproductive. Simply because, in case we forgot, "the world needs a healthy US market to buy and sell into, with Wall Street as the indispensable intermediary." And because I wouldn't want to see things get worse, I will also agree with Hugo that the City - and by extension the world - will only benefit when "the profits come back to Wall Street, and the bonuses, too."
Photo credit: CC epicharmus
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4 comments:
hi lucia,good post, made me think about thefact that there actually might be people who diagree with this paycap, a possiblity i hadnt considered. There you go.I think this is an absolutely right thing to do, and i would go even further - by creating a regulatory framework for executive remuneration along ethical principles for all business, not just the bailed out ones. This may go against the grain of milton freeman style capitalism, but we are witnessing a financial crisis in which the excesses of those who led the markets have had to turn cap in hand to taxpayers for help. We should not be prepared to continue to fund their excesses. Business leaders should be fairly rewarded but regulation should create a prudent framework for the equitable distribution of wealth. That means, some get more than others. But within certain framwoorks. CSR is based on these principles. Even if there is a cap, executives should continue to live very comfortably in NYC. They should be rewarded for results. Part of the problem of this crisis is that executive pay grew out of all proportion and in excess of the value the business they led were creating. So i have no sympathy at all with executives who have to cap their excesses. If we all learned to live with a little less, NYC would probably be a better place anyway. This is what sustainability is about, too.
elaine
elainec@b-yond.biz
www.b-yond.biz
leading reporting and assurance consultants promoting the social and environmental responsibiilty of businesses
The public feel a strong sense of injustice about this so Obama needs to include symbolic measures like this to make his stimulus more palatable.
Since movie studios are also getting breaks in the bill, does that mean actors salaries will now be capped too?
hi tom, i think there is a difference between movie actors and chairmen of boards of directors and senior executives who are paid to lead responsibly, and create value, rather than destroy it.... elaine
Or maybe we don't need Wall Street after all. Have a look at this new debate about Wall Street vs. Main Street: http://www.csrwire.com/News/14483.html