The Stimulus Package

[BreakABone]

One day I shall decipher the Professor's post and respond to it, but here is a bit more on the pre-Obama stimulus/bailout

Among the new restrictions being considered is a $500,000 cap on salaries for executives at companies that receive a substantial amount of government aid, according to a person familiar with the matter.

Some within the Obama administration fear that curbing executive pay will discourage those companies from participating, delaying the financial-sector's recovery. Another faction in the administration believes that banks need to accept fairly punitive terms in exchange for getting government money.

Some banks have already turned down government cash because they worried about the increasing number of new conditions under consideration.

I think the salary cap is both good and bad as it in some ways doesn't encourage people to work harder if they know they are going to hit a glass ceiling. While on the other hand since the gov't is paying these companies it makes sense to have some regulations.

[Professor S]

Originally Posted by BreakABone

I think the salary cap is both good and bad as it in some ways doesn't encourage people to work harder if they know they are going to hit a glass ceiling. While on the other hand since the gov't is paying these companies it makes sense to have some regulations.

Another downside is that the companies that need the most help won't be able to compete for the best high level talent.

An interesting side note is that the same thing was tried during the Great Depression, and it didn't work then either. In fact, it's how employer based healthcare and other benefits were included as part of someone's compensation, because companies literally could not give raises. The more I hear of the plans for stimulus, the more I see us repeating bad policies based on anger and spire, not a wish for success, and those policies extended a previous pitiful economy in the 30's and again in the 70's.

I empathize with the outrage to these bonuses, but after thinking about it over the long haul, I think controlling executive compensation has the potential to do far more harm to these already damaged companies and ecomomy than good.

I think there needs to be oversight and regulation of companies that received government money, but it should be based on their ability to meet payment and peformance benchmarks, not whether they gave out performance bonuses. If these companies that are in dire straits always have inferior talent, they'll never dig themselves out of the hole.

The stimulus should be about learning from previous mistakes and rebuilding the economy, not punishing businesses because of perceived moral indescretions. If you want to punish these individuals, do it throught the legal system, and there are plenty of people who caused this mess that deserve to be prosecuted.