TightyRighty.net

And now the other shoe is dropping.  An article in today’s Washington Post indicates “U.S. Targets Excessive Pay for Top Executives“.  Among the troubling statements in this article are the following:

The Obama administration named a “compensation czar” yesterday to set salaries and bonuses at some of the biggest firms at the heart of the economic crisis, as part of a broader government campaign to reshape pay practices across corporate America…

Treasury Secretary Timothy F. Geithner said yesterday that the administration is not interested in “capping pay” or “setting forth precise prescriptions for how companies should set compensation.” Instead, he said, the government wants to rein in pay practices that motivated executives to take excessive risks in pursuit of profit…

“This financial crisis had many significant causes, but executive compensation practices were a contributing factor,” Geithner said yesterday…

And more initiatives to address these practices are coming. The Federal Reserve is examining how regulators can oversee pay at all banks. Geithner and senior White House officials, meanwhile, plan to make executive pay a focus of their efforts to overhaul financial regulation, which officials say will be detailed next week…

Feinberg, who previously managed the government’s efforts to compensate the families of those killed in the Sept. 11 attacks, will control compensation at seven firms that have received large federal bailouts…

He will also have the authority to set overall compensation, but not precise salary levels, for firms that have received smaller bailouts. The goal, officials said, is to curb the practice of tying pay to performance in a way that induces traders and executives to take big risks. Feinberg can also decide whether executives who have received what he considers excessive compensation should return some of that money…

Rep. Barney Frank (D-Mass.), who leads the House Financial Services Committee, said the measures did not go far enough and plans to introduce legislation directing the SEC to outline guidelines for how compensation committees should determine pay…

Administration officials said they also hoped their efforts would pressure firms to rein in lavish pay by giving shareholders the right to vote on an executive’s overall compensation package.

There are so many things in this article to be concerned about.

First of all, do we need another “czar”?  We have an auto czar, a cyber czar, a Great Lakes cleanup czar (I missed this one – did you?), WMD czar, etc.  Why do we need all these czars?  Is it because you can infuse these folks with an incredible amount of power, but since these are not cabinet posts, they don’t require congressional approval?  Sounds very transparent to me.

Secondly, Treassury Secretary (does anyone else have a hard time calling a tax cheat the Treasury Secretary?) Geithner’s statement that the administration is not interested in “capping pay” or “setting forth precise prescriptions for how companies should set compensation” challenges credulity.  This is exactly what they want, and if not done by the administration, they certainly want to open the door so that Congress, the Federal Reserve, the SEC, etc. can do precisely that – manage executive compensation.  His claim the government wants to rein in pay practices that motivated executives to take excessive risks in pursuit of profit is also a canard.  If you do not want companies taking excessive risks, change the rules regarding the types of risks these companies can and cannot take.

Thirdly, how scary is it that the czar can “can also decide whether executives who have received what he considers excessive compensation should return some of that money.”  If the government can step in after the fact, and impose its will on decisions made by companies and their boards, then the term socialism is not too strong to describe the type of government to which we have evolved.

Finally, giving shareholders the right to vote onexecutive compensation is pitiful.  That is why the shareholders elect a board of directors.  Perhaps we should give citizens the right to vote on stimulus packages and health care reform.

The one thing in this article I don’t have a problem with is the management of executive compensation at the 7 firms who have taken significant amounts of taxpayer support, within the framework of existing agreements.  See my prior post located here regarding honoring contracts.   Going forward, if the contracts are too rich for the work being performed, fire the exec so they can go somewhere they will be paid a market rate.

I think all of these are summed up in the comment that “These efforts reflect the administration’s conclusion that companies cannot police themselves on matters of pay.”  But of course the government, in its infinite wisdom, can.  Again, we see the arrogance of our President and his administration thinking that they know better, even though many of them, the President included, have never actually run anything of any size and don’t understand the complexities of running a business in a free market.