Thursday, February 5, 2009

Wall Street Cheap

President Obama put a $500,000 salary cap on bank executives who get federal aid.

The new rules would set a $500,000 cap on cash compensation for the most senior executives, curtail severance pay when top executives left a company, restrict cashing in on stock incentives until government assistance was repaid and prod corporate boards to closely scrutinize luxury perquisites like private jets and country club memberships.


They do not apply to the more than 350 institutions that have already received bailout funds, only to those that seek aid under the next phase of the bailout program. And companies that seek aid but do not need exceptional government assistance can waive the $500,000 pay cap, as long as they submit their executive pay policies to a nonbinding shareholder vote.

Still, the rules represent the most comprehensive effort to curb compensation. “This is America,” Mr. Obama said on Wednesday. “We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”

I don’t have a problem with someone earning a decent salary and I think people should be paid what they’re worth and get rewarded for it, even if it’s a lot of money. But the operative words are “earn” and “decent.” No one should get paid for just sitting there like a potted palm and doing nothing, and they should take responsibility for the welfare of the company because there’s more than just their own salary on the line: the company loses money, so should they. When the going gets tough, the tough should not get going to a villa in Antigua and an off-shore account.

I really doubt that the rules the president announced will have an effect on the men and women who made out like bandits while their firms were failing or going tin-cupping to Washington. There are enough loopholes and caveats that make it little more than symbolic. But if the reports of whining from Wall Street are to be believed — they make it sound like they’re being wheeled through the streets in tumbrels on their way to the guillotine while Madame Defarge knits — they’re getting the message.