Wednesday, February 4, 2009

Why CEO Pay Is Over Rated

Something that has been bothering me as of late, is the ruckus over CEO pay for recipients of bailout money. President Obama made a politically savvy move by capping CEO compensation at $500K/year. While there is no doubt that this is a very popular move, it seems to be missing the real issue at hand.

I say this, because in the grand scheme of things, a few billion dollars in executive perks/pay is a such a microscopic amount when compared to the $7.36 TRILLION that has been printed and borrowed. I will take this moment to tout my article on what we should have done with the bailout money.

I don't think that people have considered the moral hazard that this issue creates, in addition to the fact that it gives CEO's less incentive to, well- be CEOs. Why would we want to dumb down the people at the top of the corporate ladder? Not to say that I actually think CEO's are overly intelligent in the first place. In addition, where will it end? If a company 'wins' a contract with the government, what is to keep the government from setting a pay cap for it's employees? What if a landlord accepts Section 8? After all, there have been lawsuits ruling that they must. What if, by crazy extension of the law, any company accepting money from a person on Social Security must cap CEO pay? After all, it isn't like you can legally discriminate over it, and the money ultimately does go through the hands of the government...

Surely this debate should also be centered on if the government should be in the position to cap CEO pay in the first place... We need to address if we are totally comfortable with the government picking winners and losers in the economy from companies that shouldn't exist anymore; spending tons of money that isn't there; and attempting to fine tune our monetary system.

Seriously people, if we had a time machine, and could go back 50, 25, 10, 5, or even 1 year- we would be shocked at what has happened, not only in our government, but also in the greater economy.

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