Now I don't want anyone to have a stroke, so sit down before you read further....
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I agree with the Obama Administration's plan to enforce a limited pay plan structure on the nation's bank officials via Federal Reserve review of current structure. The reasoning behind it is to enforce proper compensation for ensuring prudent value and responsible sound growth in the banking system. The most cited example of why it's needed, aside from obscene CEO pay scales in general, is the all-to-many cases of bank and financial loan officers approving tons of too-risky loans in order to justify or earn their bonuses and high pay.
Let me ask you: if all public school teachers earned their incomes piecemeal, in other words paid by the passing student, would there ever be any students who failed? Right. This is exactly why we do not tie teacher pay directly to student success, and the lesson should be applied to other professions when applicable.
The current structure (ie, anything goes and to the highest bidder) is simply too tempting to be implemented ethically. The government already has their hand in the banking cookie jar, so while it is there it might as well try to re-introduce self-discipline.
This isn't a stand-alone belief of mine. I think that all executive pay should have caps. At the very least, I believe that any company that pays its executives more than twice the pay of its overall employee pay average cannot then lay off or fire any employees, not any, as long as they are paying their execs so lopsidedly. Yeah, pass that law and you'll see that limit self-induce in a New York second.
Before I explain further, please know or remember that I have over 30 years experience as a tax accountant in public practice. I've done hundreds of business returns and dozens and dozens of sets of books. I understand the history, theory and practice of corporations. And I am here to tell you that they get far more priviledges than they deserve, legally and legislatively.
Corporations can well afford to have some more restrictions. It wasn't always this way. Up until 30 years ago, they did a decent job of policing themselves as related to executive compensation. When the pension tax laws were first written, there weren't any participation or percentage restrictions, because the vast majority of companies played equitably in order to keep employee unions from growing (and because of concessions unions demanded and fought for). It was only during the Reagan-era Congressional overhaul of the pension benefits tax laws that restrictions were mandated. The reason was, companies were beginning to make unequitable decisions. The shareholders-as-God era was beginning, and with that came the out-of-sight CEO pay scales.
So, now, if they won't self-regulate, someone needs to force them, because we've played this era out and we can no longer continue the Greed-is-Good-Gordon-Gecco philosophy. Let me explain the implications nobody else writes about. If a company with 12,000 employees pays its CEO $36.4 million a year plus stock incentives that veritably promote insider trading when it's highest-paid average employee earns $40 an hour, that's the kind of executive pay structure that needs to be limited. Here's what we never stop to consider, if the CEO gets that much, what about his president, 12 vice-presidents, CFO, and department managers? As the price on the top dog's head swells, so then does the little dogs' prices. Pretty soon, you have a ton of money being spent administratively...for what? Seriously. I think the jig is up about how hard these CEO jobs are. As in, they are hard, but nowhere near that hard.
So it's time to re-introduce America to regulation. (That's the whole reason I'm not for Obama's version of healthcare reform. I feel it needs to just re-regulate a variety of things, enforce the existing laws, make new ones...to regulate, and that is all for now, to see if it improves costs and procedures.) Sending a message to America's corporate boardrooms that publicly traded funds cannot be used to buy people would be a step in the right direction, and starting with the bailed out banking industry is the correct first partner on the dance card.
I told ya I'm no longer a Democrat, but I'm also not a Republican with the knee-jerk unfettered capitalism blood in my veins. Nope. As much as I hate to agree with a tax-cheat, I gotta go with Geitner on this. People should be free, and contrary to the last 30 years, corporations are not people. Let's quit treating them better than we treat ourselves.