Wednesday, February 4, 2009

CEO Pay: Make Them Think Long Term

I like the idea of capping CEO pay at firms receiving bailout money at $500,000. This would do a much better job of aligning executives' interests with the interests of their companies and the larger American economy.

You don't want the people running these companies to be thinking of their jobs as opportunities to get rich quick. Obviously, $500,000 makes you rich, but not crazy mega insane rich like people used to get in the sector. I hope that there's some way to contain future CEO pay, but in all likelihood once the economy returns to health, salaries will jump to several times $500,000. And that's actually not such a bad thing, because people running these companies need to be thinking about keeping their companies alive so they stay in their jobs and eventually get the pot of gold at the end of the rainbow.


Pollyanna Ranting said...

I'm not sure that financiers are more likely to want to keep their companies alive because of what they get at the end of the rainbow. Banks were dependable and solid in the fifties through the seventies, during which time the top marginal tax rate was between 70% and 90%. A friend of mine grew up with a close family friend as an old school stockbroker. He gave solid financial advice and by retirement age, all of his clients were solvent. My friend dreamed of doing the same thing, but the brokerage firm he started with just wanted him to churn accounts and mislead his clients into risky investments. So my friend, a staunch Republican guy, quit for idealistic reasons. I say, bring back high marginal tax rates for the top 0.1%.

Neil Sinhababu said...

Pollyanna, you might like this.