Obama new cause for poverty in America?

[BeBMan]

Did you know he applauds plans to to cut poor people's money by ca. 90%? It's all true!

President Barack Obama has welcomed plans to force some companies which accepted government aid during the financial crisis to cut executive pay.

Firms paying bosses vast bonuses while getting state assistance offended people's values, the president said.

Under Treasury plans, seven companies must slash the basic salaries of their 25 best-paid employees by up to 90%.

Full article: http://news.bbc.co.uk/2/hi/business/8321435.stm

Now what should an ordinary millionaire or billionaire do here? He's basically ****ed for the rest of his life

I do feel very compassionate for these people, and so should we all

[Zevico]

I think the salary issue is not so important. What is important is that companies pay their idrectors mostly in shares that can't be sold for a fixed number of years, e.g. 5-10. Obviously cash salary will also be necessary, but the higher proportion of their salary should rise and fall with the fortunes of company on whose behalf they are acting.

[BeBMan]

Having more oversight would also be nice IMO, if it's not teh pure commiehood

[Zkribbler]

He's basically ****ed for the rest of his life

It ain't for the rest of his life. His salary is just limited to $500,000/year until his company repays the bail-out loan. Give us our money back, and then you can party 'till ya puke!

[DinoDoc]

I do feel very compassionate for these people, and so should we all

You probably should. It would seem to be a sure fire way to chase the best and brightest away from these companies hurting the long term health of these companies.

[BeBMan]

It would seem to be a sure fire way to chase the best and brightest away from these companies hurting the long term health of these companies.

Maybe the best and brightest wouldn't need a massive influx of tax payer money to keep their companies alive..

[DinoDoc]

Maybe the best and brightest wouldn't need a massive influx of tax payer money to keep their companies alive..

A few questions about the merrits of this proposal:

1) If you slash the compensation of your top talent by the amounts being bandied about by the government, how are you going to keep or attract the people most likely to lead you out of a slump? You should also consider that it is far from clear that this practice will be limited to those firms on the dole.

2) Is there even any evidence that pay practices were the real problem causing excessive risk in the financial system? From The Fed's Errant Crusade To Reform Bank Pay:

[M]any banks already had policies that are very close to the ones the government wants to require. Bankers at Lehman Brothers were heavily invested in shares of Lehman Brothers, owning 25% of the shares. Most had stock options to purchase more, giving them the equivalent of a bonus deferral. When Lehman Brothers went bankrupt, many lost sizable chunks of their wealth, which had the effect of a clawback.

More importantly, if bankers were blindly pursuing risk, they would have loaded up their balance sheets and trading books with the highest yielding, lowest rated securities. In fact, they did just the opposite. Just 19% of rated securities held by banks were AA or lower. By contrast, 81% of bankers chose to acquire AAA rated securities, the safest stuff around. This preference for safety indicates that bonus incentives were not making bankers heedless of risk.

What's more, banks often bought insurance on the securities they purchased, seeking to water down whatever risk remained. This was a thriving business for the bond insurers and for companies like AIG that sold credit default swaps. If bankers were reckless gamblers, bond insurance would have been unpopular. The bankers mistakenly believed they were being prudent and careful despite a bonus system that seemed to incentivize them to be imprudent and reckless. * * *

Alan Schwartz at Bear Stearns and Dick Fuld at Lehman Brothers both argued that their investment banks were healthy just before they collapsed. Since misleading shareholders has serious legal consequences, it seems far more likely that they were simply mistaken rather than intentionally lying. Fuld reportedly turned down an offer of billions in new capital from a Korean financial institution just days before Lehman went bankrupt. Why would he do this unless he was mistaken about the health of Lehman?

3) Following on with the last two points, even if I were to grant that compensation were the problem I fail to see the arguement that the government is the best avenue to solve it. As we have seen the government is more than likely to swing the pendulum in the other direction and be over conservative pusing capital and labor flows to other industries.

[BeBMan]

I'm sceptic about 1. It seems to me receiving massive boni/payments/whatever in the past didn't attract those great "bright" people who led their companies all well. Or maybe they were bright indeed, but acted irresponsibly. However, at least not in a way that avoided the current mess.

In that case they should have learnt their lesson now and IMO not expect to get lotsa stuff just to make it attractive for them that they fix something which shouldn't have happened in the first place.

2. Dunno, even if it's not the (main) cause, the argument could still be made that those who accept tax payer money have to live with strict limitations if they do that (*I* didn't mean the rest).

3. Well, I had no probs if i's done by someone else than the gov provided it's not some way to avoid any not so pleasant limitations at all.

[MrFun]

You probably should. It would seem to be a sure fire way to chase the best and brightest away from these companies hurting the long term health of these companies.

Yes, because living on "only" $500,000 brings so much hardship.

[Solomwi]

Yes, because living on "only" $500,000 brings so much hardship.

Yes, because your idea of what is enough for someone to live on matters.

[KrazyHorse]

Yes, because living on "only" $500,000 brings so much hardship.

This has nothing to do with hardship. This has to do with the fact that people who make 500k or a million dollars a year do so for a reason: they are valuable employees. If they weren't worth that much to the company then why the hell would the company pay them that much money? Are they some sort of charity group? If specific banks or industries are restricted in the pay they're allowed to set then it's quite clear that their most valuable employees will leave them for greener pastures.

Some day you're simply going to have to accept that what you do is worth only a tenth or a hundredth of what some other people do.

[KrazyHorse]

I'm sceptic about 1. It seems to me receiving massive boni/payments/whatever in the past didn't attract those great "bright" people who led their companies all well. Or maybe they were bright indeed, but acted irresponsibly. However, at least not in a way that avoided the current mess.

Wow, it's great that you've decided that there's some sort of obvious flaw in leadership rather than simply the inherent uncertainty associated with chaotic systems.

[David Floyd]

Some day you're simply going to have to accept that what you do is worth only a tenth or a hundredth of what some other people do.

Or, you could try to do better next time they are giving stripping lessons.

[DaShi]

@them being the best and brightest.

[KrazyHorse]

A lot smarter than you, sweetheart.