Capping the Incapable

_45415552_obama_ap226bThe era of unbelievable wall street bonuses and golden parachutes is coming to an end. At least this is the message President Obama is trying to spread to the morally bereft businesses in the United States.

On Wednesday last week the new president announced an executive pay cap as a criteria to gain access to the stimulus package. the cap is supposed to limit the basic pay of CEOs and the like to $500, 000 while also restricting any future bonuses to take “the form of stock that can’t be paid up until taxpayers are paid back for their assistance”.

The infamous bonuses which have been handed out to executives during the current financial crisis are not only ludicrous and foolish but morally wrong and yet more proof of the ignorance and disconnection the people who pull the strings are suffering from. The notion in America that earning a lot of money (and recieving bonuses on top of that) is justifiable is not all stupidity. I do not dispute the fact that a person deserves to harvest the fruit of his own hard work. However, due to the structure of todays pay scheme the “oridnary joe” is working over time so his boss can reap the benefits.

The American is being burnt twice over, first by the executives receiving great pay and bonuses for achievements mostly made by their employees and second by the executives financing their new golden offices with the taxpayers money when millions of jobs are being lost. Thus I find it puzzling  that Americans still put faith in the right to earn your money (or rather thy neighbours money) this way.

While the Obama administration’s measure is certainly welcome, it is an obvious incentive and one that would have hurt the president’s credibility had he not put it forward (even worse alongside the recent tax embarrassments). Some might even claim that the president’s initiative is generous. Despite the fact that $500, 000 is “a fraction of the salaries that have been reported recently” it is still well above the amount that seems necessary during a crisis like this one. 

Frankly I believe the decision on a pay cap should be stretched further and include buisnesses which have not asked for a share of the stimulus. If Obama truly want to get ridd of the crooked bonus systems of todays buisnesses, he will have to do a lot more than restrict the newly involved companies. Certainly, reward should still be given for hard work. But when your company is laying off thousands of people, giving yourself and other executives multi million dollar bonuses does not make sense.

Of course, having said that, there is a certain group of people (no names mentioned) that oppose Obama’s recent move and the path on which the U.S. is embarking. Reportedly, there is a growing fear amongst analysts that the pay cap will see CEOs fleeing from the big firms to the smaller investment banks, taking their talent with them. Aknowledging how keen most top people are on getting their luxury offices (including thousand dollar dustbins – not kidding!), this might well happen.

However, having grown up with the belief that change is eternal (and thus invitable), this might not be a bad thing. While the pay cap may result in some talent loss within the big companies it will subsequently give the smaller ones a greater pool of talent, perhaps create a tear in the shrewed monopoly of banking today and allow all parties to compete in the upper classes (with time small streams do develop into great floods). 

Furthermore, who said that loosing greedy executives is a negative loss? Certainly, most (if not all) developments contain a degree of positive consequences. As it is, fleeing executives might actually provide opportunities for ambitious, young and hard working people who would not otherwise get to take part (rather they would be put backstage, working their asses off only to have the credit for their achievements stolen by pennypinching executives). The knowledge and experience of the current CEOs are still needed, however in this debate their importance have clearly been exaggerated.

 

– Kajsa, Admin Future for America
politics.of.tomorrow@gmail.com

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~ by politicsoftomorrow on February 9, 2009.

2 Responses to “Capping the Incapable”

  1. Det är ingen liten utmaning Obama står inför. Det finns egentligen inga beprövade erfareneheter hur en finanskris av den här skalan kan lösas. Men utan tvekan krävs både mycket pragmatism samt förmåga att få männiksor med sig för att ställa upp för det gemensamma. Både dessa egenskaper verkar vara Obmamas adelsmärke, men nu är det som sagt upp till bevis, om vi skall få uppleva den utlovade “Change” som självklart inte enbart berör amerikansk politik. Nya genomförbara politiska visioner är mer nödvändiga nu än på mycket länge.

  2. I agree with you that the bonuses and parachutes where excessive, although that kind of thinking will brand me as a socialist 🙂
    The idea behind bonuses is however not entirely wrong, it is a way to connect the CEO (and others) reward with the company something which grows exceedingly important as corporate ownership gets more and more anonyms. That the system has been misused is nevertheless clear.

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