Has the Sherriff Finally Come To Wall Street?
EmailFor many Americans the sheriff has finally come to town. Kenneth Feinberg, the compensation “czar” for the government, has ruled big pay and compensation cuts for the top earners at firms that took the most taxpayer bailout dollars. Feinberg has been given an extraordinarily powerful post – he alone signs off on compensation policy for companies that are propped up by federal assistance. But this is not Feinberg’s first extraordinary job.
You’ll recall that he was the man in charge of deciding the compensation for the 9/11 families who agreed not to sue the airlines. Each of these families was given money for the loss of their loved ones — the amount based on a complex formula – designed by Feinberg – that took into consideration many factors including potential earnings. The grieving families met intensively with Feinberg before he determined their compensation. Each family received a different amount. His word was final. Many of the families grew to respect and appreciate him and his efforts. We made Ken Feinberg our Person of the Week back in December of 2003. Worth a read.
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Am emphatic NO!
Only addressing the symptom…..the bail out firms……does not address the larger problem, of compensation packages that encourage wrong doing, self-profiteering, and disregard for the long term health and well being of a company, nor the well being of the employees of that company.
Unless Congress passes limitations on stock incentives (a major cause of CEO wrong doing), and other compensation excesses, across the board, for all US Corporations, and indeed foreign corporations, doing business in the US, the corruption of Corporate America, cannot be reversed.
Of course, doing that, means reversing the corruption of Congress, which is a formidable task, in itself.
Posted by: Rick McDaniel | October 22, 2009, 10:15 am 10:15 am
Shareholders of every major corporation need to pay attention to what happens when this massive pay cut is put in place. My guess is that there will be no loss in CEO performance quality, but just a purging of the old boy’s network that has resulted in the massive inflation of CEO salaries in the past decade.
Not every CEO is Jack Welch – so why are they now, even when failures or mediocre at best by every metric, typically getting paid MORE than he ever did?
(For reference, Jack Welch took GE from a $14 billion company to a $410 billion company while increasing revenue by about a factor of 5. In the final year of his tenure, he was paid $4 million – which was quite high, as befit his exemplary performance.)
Posted by: jhw539 | October 22, 2009, 10:22 am 10:22 am
“Unless Congress passes limitations on stock incentives (a major cause of CEO wrong doing), and other compensation excesses”
That is not Congress’s power. They should pass regulations to ensure shareholders rights. It’s dull, but there are a number of dirty tricks used by boards to disempower shareholders that can be effectively undone by reasonable and limited regulation. Then allow the actual owners of the companies – the shareholders – to deal with it. Hopefully with this effort to show the way (go ahead and trim $10 million off your CEO’s salary, there is a VP just as good who’ll be happy to do the job if the CEO leaves).
Posted by: jhw539 | October 22, 2009, 10:25 am 10:25 am
OK, who let the misspelled word get through?
Posted by: carolB | October 22, 2009, 3:02 pm 3:02 pm
Was a pay-czar needed? — of course. Question is, how idiotic was it in the first place for lawmakers to throw huge amounts of money at a broken system and not KNOW that they needed a pay-czar from day one. Dumb dumb dumb.
Final result: even with a pay master the financial world will find plenty more wiggle room to continue to line their pockets — its the American way.
Posted by: jhaake | October 22, 2009, 4:04 pm 4:04 pm
Well, finally, something is being done. We, the tax payers, bailed out those companies. We, the tax payers, are not in the incentive business..When they become solvent and pay back what they owe us they can be given huge incentives again. But until that day arrives they can take a lesser pay check because they owe us big time. I was appalled to think they were being given millions of our tax money to CEO’s who in essence ran the companies into the ground.
Posted by: Sharon | October 22, 2009, 4:59 pm 4:59 pm
Treating symptoms? When a child has a fever, you treat the “symptom” first so that it will not kill him before his body has a chance to defeat the disease!
Almost anything can be dubbed a “symptom” of something else. But the truth of the matter is that when top execs have great monetary incentive to line their pockets quickly and then bail out on golden parachutes, they are NOT likely to keep the best interests of the corporation close to their hearts! Top execs should be like shepherds to the “flock” constituting their corporation. But some of these “compensation packages” frankly give the execs more incentive to FLEECE the company than to LEAD it!
Posted by: Jordan | October 22, 2009, 5:45 pm 5:45 pm
Oh, by the way…SHERIFF, is spelled with one R. you really need to proof read your titles and also the entire story before publishing it, one other person caught the misspelling too.
Posted by: Sharon | October 22, 2009, 5:49 pm 5:49 pm
jhakke. Did something have to be done? Yes, unfortunately it did. When you understand that AIG alone is closely linked to the success or failure of a third of our large and small companies, do you still recommend it go in the toilet hauling almost if not all of those other companies down the drain with it? Obama was faced from the gun with more formidable problems than any other President since FDR. Had he simply done nothing as Hoover did for too long in the late 20′s, we would have another Great Depression. This economy may need rebuilding from the ground up to create a standard of living at all comparable to what we had for most of our lives for our kids and grand kids. Simply giving money directly to the unemployed wasn’t going to accomplish that. To do it the status quo will have to be shaken up, and fat cat organizations such as the National Chamber of Commerce fighting the greening of industry and essential health care reform are simply saying if things are okay with us then they’re okay for all of you. WRONG!
Posted by: Igor | October 22, 2009, 7:33 pm 7:33 pm