Thursday, October 1, 2009

Limiting Pay

What would happen if we limit the pay of top executives working for private companies? Why do we want to limit it? If you do limit their pay, Where does it go?

I'll start with why. Why do we want to limit pay? Simple. Anger and jealousy. The masses are angry that wall street executives made loans they new were not wise, made millions of dollars doing so, and then were bailed out by our tax dollars when things went south. The anger is righteous. The solution would have been to let them fail. We are jealous because we see the lifestyles they lead, and believe falsely that if those executives had less the rest of us would have more.

Where would that money go? These are privately owned companies. If the money doesn't go to the executive it would stay in the coffers of the company to be used for various other endeavors like building new offices, expanding services, or perhaps just stay on the books as profit in cash. BUT.... would that really be okay. I mean isn't the point here that these companies are making too much money at the expense of consumers. So, instead a windfall profit tax would be in order. Therefore instead of expanding their business and HIRING more employees, they will shelter it in foreign investments, or have it taken by the government to be given to others.

The myth here is that there is a limited amount of money in the economic pie. Each dollar I have in my pocket is a dollar not available for anyone else. This is only a myth. In reality profits grow the economy and make more jobs available. Deficits shrink the economy and make less jobs available.

It isn't difficult to see what will happen. You can't redistribute money to make all people equally wealthy. You can only redistribute money to make all people equally poor. Understand that if you took ALL the profits from Exxon Mobile at the peak of their profit, each tax payer could get 1 tank of gasoline. Whoopie.


Mookie said...

I understand the basis behind such arguments. I do have a problem with making a law regarding the situation. I also have a problem with morons who run the companies who allot such grand compensation packages to these bigwigs.
If they instituted a little common sense and as a business world, told all potential CEO's that any payouts are tied to positive performance only, not some random "rider" the appointee wants attached to his contract.

The problem with the argument many conservatives (and I have been guilty of this thinking as well) make about having that money to hire more workers, etc... is that is often doesnt happen in that fashion. I mean yes, there are some expansions within the workforce, but a good chunk still goes strictly into bigger bonuses, extra perks for senior members and the like. But in any lean times the only ones who genuinely feel anything are the lower-tier workers who see 2.5-10% reductions in pay that isn't what you'd call "great pay" to begin with, and the money is often allocated to other sectors of the company, primarily upper-level managers and the like, who aren't real producers, but often in inherited positions.

Case in point: My wife's division of her company was almost the sole reason the overall parent company showed profits. So the big board announces pay freezes company wide. Fine, even the big boys took the freezes, followed by paycuts. It would be one thing if the money was being allocated to say, reserves to maintain financial security should things go down the hole a little ways in the future. However, it was found out that they money being cut from the producers was going into a pool for bonuses. Some for sales positions. I get that, stimulate the sales guys to hit some marks and improve the growth of the bottom line, but also the big wigs of those departments (read, guys who made this decision and only oversee the guys who create and run these positions, and generate the income). Meanwhile, the one profitable division....noone in that division is eligible.

And to me, on face value, that just doesnt make any sense. Not because I'm personaly affected, but because it flies in the face of what I perceive to be common sense.

Like I said, I get the arguments on both sides, but I think often times both sides get caught up in disingeuous generalities of "what could be" when making their points.

Anonymous said...

The more ominous problem with slashing these CEO's pay at the same time officials are announcing that our banks are in an even more precarious position that they were before, is that what America needs most right now is to have the best. most qualified people possible in those positions. What Democrats have done is ensure we will have the worst.