The View From 1776

Regulating Executive Compensation Is Not As Simple As It Sounds

Read Professor Richard Epstein’s doubts about the prospects.

Posted by .(JavaScript must be enabled to view this email address) on 10/28 at 01:22 AM
  1. What rankles is the unconscionable sums being paid, essentially out of tax dollars, to people at bailed-out institutions. It is particularly galling if those high bonuses are tied to the type of risky behavior that got the company and the economy in trouble in the first place.

    If those companies are on the public dole, they can have the decency to spend their relief checks wisely - at least until they get back on their feet and can repay the bailout funds back to the taxpayers (with interest).

    Then, once out of the hole, if they wish to hand out millions of their own cash to their people, more power to them.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/28  at  09:00 AM
  2. Wasn't the problem regarding 'excessive' executive pay resolved by the clinton administartion limits on the ability of a corporation to expense that cost for tax purposes? Stock options were to replace cash payments in order to 'align' the interests of corporate officers with those of shareholders, remember? Fianancial services companies, particularly FED supervised banks and primary dealers were thus incentivized to see their stock prices rise through increased earnings, many times by 'chasing yield' or the fees generated through securitization. The unintended consequences of such social engineering through tax policy combined with artificially low interest rates and the political class's belief in expanding home ownership since, as we all know, residential real estate prices never go down, may have skewed market based incentives in favor of more 'politically correct' goals. Congressional oversight commitees alowed the GSE's to leverage their capital at a ratio of 100 to 1. The stock based bonuses paid by these taxpayer backed GSE's to their executives had no realtionship to economic reality. Market forces are not in play. These organizations, much like the FED supervised banks, are sensitive to political and central banking concerns rather than the supply and demand for capital/savings.

    The current arrangement is great for politicians and the state supervised banking system, an almost perfectly opaque, heads they win-tails we lose bet.
    Posted by .(JavaScript must be enabled to view this email address)  on  10/28  at  12:34 PM
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