Missing the Point on Executive Pay

Typically, the Congress has brought together a hanging-posse, stirred irrational emotion to a fever-pitch and galloped off in a cloud of dust after the wrong bandit.

Congress Trumps Obama by Cuffing Bonuses for CEOs

By Tomoeh Murakami Tse
Washington Post Staff Writer
Saturday, February 14, 2009; A01

The stimulus package Congress passed last night imposes new limits on executive compensation that could significantly curb multimillion dollar pay packages on Wall Street and goes much further than restrictions proposed by the Obama administration last week.

The bill, which President Obama is expected to sign into law next week, limits bonuses for executives at all financial institutions receiving government funds to no more than a third of their annual compensation.
The bonuses must be paid in company stock that can be redeemed only when the government investment has been repaid. With the measure, lawmakers seek to address public outrage over extravagant Wall Street paydays even as taxpayers bail out the industry.

Unlike the rules issued by the White House, the limits in the stimulus bill would apply to top executives and the highest-paid employees at all 359 banks that have already received government aid.

“This is a big deal. This is a problem,” said Scott Talbott, chief lobbyist for the nation’s largest financial services firms. “It undermines the current incentive structure.”

–read entire article–


How much executives are paid is much less destructive to the American business community than what their compensation is based upon.

Certainly the linkage between compensation and stock price has been catastrophic in the form of boom-and-bust economies as well as the near total destruction of the American credo of actually making something. Stock-options, bonuses, deferred income and rock-star salaries have brought us greed rather than talent, as is proved by the collective ‘what the hell went wrong?‘ at Davos.

Congress needn’t to worry about compensation–it’s a mere speck on the plate that has become a turd in the punchbowl. What they need to study, is a way to disconnect quarterly earnings statements from the long term strategic goals of American business.

We need to, for god’s sake, begin to make something again.

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