The big news of the day from the world of politics is that President Obama plans to cap executive pay at banks that take bailout money in the next round of emergency cash payments. This is not popular with the executive class:
"That is pretty draconian -- $500,000 is not a lot of money, particularly if there is no bonus," said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. "And you know these companies that are in trouble are not going to pay much of an annual dividend."
Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.
My immediate reaction to this: Good.
In fact, the fact that Mr. Reda and his CEO friends think they ought to be able to dictate the terms under which they will graciously allow the US taxpayers to rescue them from the galaxy-swallowing financial black hole that they created through their own arrogance and incompetence only strengthens my conviction that the sooner these assholes are packed off to a desert island where they use monkey crap as currency, the better.
The current executives won't deign to work for half a million a year? Fantastic. Let's drop the limit to a quarter-million, just to be safe. The people running Wall Street the last twenty years shouldn't be allowed to keep the bank in an elementary-school game of Monopoly, let alone an actual financial institution.
$500,000 is "draconian?" No, "draconian" would be telling them to go live in the foreclosed trailer homes of the people who have lost their jobs because of the gross mismanagement of, well, pretty much everything the financier class has touched in the last decade or two. $500,000 is about three orders of magnitude more than these executives deserve.
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Holy crap man. If someone ever said "500k? That's not really a lot of money" the body would make hardened crime scene investigators ill. If someone paid me that much I could live off it, assuming I kept my present rate of consumption, for like 15 years.
This made me angry at first, but now it just makes me feel kind of nauseous. I'm worried sick sometimes about how I'm going to keep the bills paid for my wife and I on a grad student's income while she tries to find a job somewhere without going into debt, and 500k is draconian? Crap man, 10% of that on top of my income would see us through till I get my PhD, and some would be left to supplement postdoc income.
What do you even DO with 500k a year? I can't even picture WANTING to spend that much, let alone needing it for anything.
I'm not sure why Mr. Reda is upset. No one is forcing him to take any money from the bailout funds. If he feels he can do the job, he won't need any TARP money. Then again, if the majority of big company execs had been doing their jobs...
When these petulant brats quit believing their own lies and hype, and start running their businesses in a way that actually makes a profit in the reality-based world instead of driving them so deep into the hole that only gigantic government bailouts can save them, then they can have more candy.
Maybe the execs heard it as 500,000 pesos. I agree that is not a lot of money for a bank executive.
Haven't seen a good rant here in a while. While i enjoy the cute baby pics, good science discussions, and commentary on F&SF books, it's good to be reminded that this place is a member in good standing of the cyberspace community where semi-rational venting of spleen is almost mandatory.
Bouncing Bosons-
I can imagine spending that kind of money, but it always ends with "Welcome to my secret island lair. You will find escape quite impossible.".
Obviously, in any company that accepts a federal bailout, the executive staff are agreeing to work for the federal Executive Service pay scale.
A mere GS-15 starts at $95,000 or so, but the Executive Service goes up to $186,000 or so.
Fargo:
ha-HA! Very nice, that made my evening.
Do you recall during one of the Dem primary prsidential debates at a college when Charlie Gibson asked a question about taxes that implied that the college professors in the audience made $250K and up? The audience and the candidates all laughed. He was clueless.
People who are used to making that kind of money can't imagine living on a real "average" wage, so they apparently have to believe that normal looking people -- people who look like them -- are bringing in six figures.
This is just sick. They're taking money from people who don't even dream about that high a salary and saying it's draconian. And the "but we'll lose the best people" line is bogus... you need to lose all your people for the mess they put us in.
I'm with Bouncing Bosons on this, I genuinely can't understand what people do with that kind of money or how out of touch with reality they must be to think it's not a lot. I mentioned on another sB site that I still have money left over to save from my £25k salary after I've paid my rent, bills, food, bought a ton of books, had a few holidays and worked in all sorts of other expenses like gifts, clothes, etc. Do these people eat diamond-studded gold flakes instead of breakfast cereal or something?
I've maintained for a long time that all salaries should be capped at £100k, no-one can realistically claim to need more than that. The only exception should be politicians, their pay should be capped at the average wage of the skilled worker in their country, reviewed on an annual basis. That should ensure they stay grounded and in touch with their employers as well as making sure no-one enters politics out of greed. Obviously things like travel expenses would be covered but there would be seriously massive penalties for taking back-handers or anything like that. I suppose I can dream...
Their recruitment logic is fundamentally flawed -- because, if most of a sector is getting bailout money, then ALL salaries in that sector will be capped, thus -- folks in that sector have a choice -- work for the capped salary or go elsewhere.
As someone who will be the sole income next year -- of about 50K, 500K sounds ok to me... where do I apply?
The recruiter is really grumbling because their salary is a function of the salary of the employee thy place.
#2: I can't tell whether you're joking or not, but I have no trouble at all imagining spending half a million a year: the mortgage on a multi-million-dollar home, private school for the kids, alimony and child support for the first wife plus a small staff (cook/housekeeper/gardener) should do it.
I heard a similar reaction on NPR yesterday. The commenter brought up the experience of that banking/finance executives have, and all I could think of was, "What experience? You mean the experience of precipitating this crisis? Maybe they should all get pink slips instead of $500k."
Yes, pink slips for failure instead of $500K. Works for me. They should have to live on my income, or what I had as a grad student. GRRRRRRR!
Come on, you people; you really don't know how they spend their millions? They pay for an apartment overlooking Central Park plus a home in Connecticut. They have a grounds crew at home and nannies in the city. They pay for a lodge in Aspen and maybe a condo in the Caribbean, and traveling first class with the family on every trip there. They don't buy their suits off the rack, and their wives (or husbands, I suppose), don't wear jewelry with stones under a carat each. They buy cars for prices that most people don't make in a year. They don't wear Casio watches and what they pay for their writing pens would feed a family of four for a week. Or two. Their shoe budget would equip a solider in Afghanistan for a month. They eat lunch in restaurants I couldn't get into if I wore a tux, and sometimes they probably even pay for their own meals. $500,000? That's peanuts for a trip to the circus.
Oh, and by the way, dear, I'm having cocktails with some associates, so I won't be able to make it to the circus. My secretary will have someone pick up the kids after school.
Here's a list of what some of the top financial execs made in 2007:
http://money.cnn.com/news/specials/storysupplement/ceopay/index.html
They pay for a lodge in Aspen and maybe a condo in the Caribbean, and traveling first class with the family on every trip there.
First class is for cheapskates--a true banksta* keeps a private jet parked at Teterboro for this kind of thing, and don't forget that he also has to pay the flight crew.
I could have been just as effective as Reda et al. at running their companies into the ground, and I would have been much less expensive than they were. $500k would have been several times more than enough to replicate my current lifestyle, even allowing for Manhattan's high cost of living. Add an allowance for the fact that I'd have to wear expensive suits and shoes instead of the ordinary clothes I wear, and I'd still be saving well over half of the $500k. But then again, I'm not a banksta.
*I picked up this term on one of the Calculated Risk comment threads. It definitely describes the Wall Street mentality.
Thank you, Eric Lund, for introducing me to the word "banksta." That's pretty great.
Brings flashbacks to a radio joke from a decade ago, in another country:
"See that Benz parked outside? That is LAST years model.
See this Armani suit? I've been wearing it all WEEK.
See this Rolex? It's last months model.
We need more compensation."
So... if it is such peanut-change, can I be hired as a CEO for the simple sum of $500,000? I mean, I will likely not do any worse than many of these multi-million salary people, and my net losses to the company will be smaller due to my smaller salary, thus saving that company money! (I will even forgo a bonus!)
I wonder how long it will take for US to become like Iceland - with the national debt $125,000 per person, 20% inflation and daily pitchfork rallies. Iceland collapse was entirely brought on by their rapacious bankers.
I hear pitchfork rallies are the new NASCAR. I'm sure we can figure out how to cash in on this.
The divorces will come thick and fast: all those trophy wives entitled - by law - to be kept in "the manner to which they have become accustomed".
The suicides will come soon after - they have started already.